Bank of Uganda fines gov’t UGX 405 billion for unmet debt obligations

Summary:

• The Auditor General’s report reveals that the Bank of Uganda imposed a UGX 405.049 billion penalty on the government for not meeting domestic debt obligations in the Financial Year ending June 30, 2023. The report expresses concern about BOU potentially pushing the government into unsustainable debt with high charges, urging discussions and suggesting a cap.

---

The report from the Auditor General on the Financial Year ending June 30, 2023, discloses that the Bank of Uganda (BOU) imposed a penalty of UGX 405.049 billion on the government. This penalty resulted from the government’s failure to meet contractual obligations related to domestic debt during the same financial period. Additionally, the report notes that BOU levied UGX 16.657 billion in bank charges on the government.

Expressing concern, the Auditor General highlighted the potential risk of BOU consistently pushing the government into unsustainable debt due to high bank charges and recapitalization. The report recommends in-depth discussions to decrease these charges and proposes the implementation of a cap to ease the burden on the budget.

As per 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 must maintain financial viability. In the event of recurrent losses, BOU is obliged to inform the Minister of the reasons for its financial position and suggest measures to restore a healthy financial state.

Furthermore, the MoU specifies that BOU can recover charges for its services to the government, and the schedule for these charges is subject to amendment. The Auditor General recommends that the government reviews and establishes a single funding line to assist BOU in fulfilling its core mandate of monetary policy and providing banking services without contributing to unsustainable debt.