SINKHOLE? Of BoU’s UGX2 trillion losses and why MPs want the central bank’s excessive independence curbed BoU in the last 15 years has made losses of UGX2 trillion (USD545 million). In FY2018/19 alone, according to its annual report, the bank reported a loss of UGX859.2 billion. In FY2020/21 government plans to inject another UGX481.7bn bringing the total amount of capital to UGX1.6 trillion.

The MPs who include: Butambala County Hon Muwanga Kivumbi and Dokolo Woman Mrs Cecilia Ogwal in their minority report of the Budget Committee on the National Budget Framework Paper for the Financial Year 2020/21 to FY 2024/25 observed that the chronic continuous recapitalization of the Central Bank is starving other critical government programmes like Health Education and Industrialization of the much needed resources.

In their report, the three MPs noted that by FY2019/20 Government had recapitalized Bank of Uganda to the tune of UGX1.1 trillion. This includes UGX200 billion 2019/20.

There is a proposal to add a further UGX481.7bn in FY2020/21, which would bring the total amount of recapitalisation to UGX1.6 trillion. The three MPs recommended that this be declined and the central bank tasked to delve into other ways of reversing the perennial loss-making streak.

This is on the back of a revelation yesterday that the central bank has made UGX2 trillion (USD545 million) in losses in the last 15 years- except for 2007 when UGX40 billion in profits was made. In FY2018/19 alone, according to its annual report, the bank reported a loss of UGX859.2 billion alone- UGX663.8 billion was lost in foreign exchange losses alone

Yesterday, Finance State Minister, David Bahati shocked members of parliament when he said that it was true that BoU had made losses and nothing can be done about it.

“The bank truly trades in securities but it invests in monetary policies that involves in making losses; these are the facts on the ground; we cannot do anything about it because a loss is a loss,” said Bahati.

While central banks invest in securities to raise revenue for national coffers, market unpredictability and volatility put them at risk of loss, parliament said in a statement, without giving detail on the type of losses for the wholly state-owned bank.

In the recent days, the professionalism and trust levels in the central bank have drastically reduced with many lawmakers and analysts calling for the excessive independence of the central bank to be checked.