Government plans to inject Shs 484 into the central bank to recapitlaise it, MPs on the Finance Commitee of parliament heard yesterday.
Officials from the ministry of Finance led by the Accountant General, Lawrence Ssemakula told the MPs that the money is needed to cover for deficits and losses accumulated since 2013.
Ssemakula told the committee that without the money, Bank of Uganda would plunge into a financial crisis.
“They [BoU] have indicated that they have been impaired from June 2013. So as per the BoU Act, we have no option but to allocate the money in our budget since their operations are in deficits,” Ssemakula said.
Some committee members said no more money should be injected into the central bank until there is a thorough investigation into the cause of losses and deficits at BoU.
Some economic analysts have zleardy questioned this decision saying by recapitalising the central bank, the country would be throwing good money after bad.
The bank was at the centre of investigations by the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) which unearthed incidents of gross mismanagement of the process to close some commercial banks.
One of them said: “Whereas recapitalising BoU is a strategic and urgent business for parliament, it should also be equally urgent and strategic to quickly implement the COSASE recommendations on restructuring both the management and regulatory regime at the central bank. The people who are behind the mistakes that led to the need for recapitalisation, cannot be the same people to manage the recapitalised central bank. That would be the equivalent of throwing good money at bad money.”
The analyst said BoU potentially faces up to Shs 1trillion in lawsuits as a result of the findings and recommendations of COSASE.