The Auditor General’s report for the Financial Year ended June 30, 2023, has revealed that the Bank of Uganda (BOU) imposed a penalty of UGX 405.049 billion on the government for its failure to fulfill contractual obligations related to domestic debt in the same financial year. The report also highlighted that BOU charged the government UGX 16.657 billion as bank charges during the period under review.
The Auditor General expressed concern over the potential risk of BOU consistently pushing the government into additional unsustainable debt due to high bank charges and recapitalization. The report called for profound discussions to revise these charges downward and suggested the institution of a cap to alleviate the strain on the budget.
According to the Memorandum of Understanding (MoU) between BOU and the Ministry of Finance, Planning, and Economic Development (MoFPED), the government is responsible for recapitalizing BOU, while BOU is required to maintain its financial viability. In case of recurrent losses, BOU is obligated to inform the Minister of the reasons for its financial position and propose measures to reconstitute a healthy financial position.
Additionally, the MoU stipulates that BOU can recover charges for its services to the government, and the schedule for these charges can be amended. The Auditor General recommended that the government reviews and obtains a single funding line to help BOU fulfill its core mandate of monetary policy and provide banking services without contributing to unsustainable debt.
