Central bank tops government loss-making bodies

Bank of Uganda governor Tumusiime Mutebile. Photo by Stephen Wandera 

By Yasin Mugerwa

In Summary

Red Flag. An Auditor General report shows that Bank of Uganda is posting a Shs600 billion loss.

At least 16 taxpayer-funded agencies face bankruptcy after it emerged that they are posting huge losses on account of poor management decisions that have apparently eroded billions of shillings in taxpayers’ money.

The Daily Monitor has learnt that the Central Bank, the country’s “lender of the last resort” and “the banker of commercial banks” which is currently in “red flag position” with a loss of Shs600 billion, tops the Auditor General’s list of loss-making public bodies.

The revelation that the Central Bank faces bankruptcy means that in case of any volatility in the foreign exchange market, the Bank may fail to stave off the scarcity of dollars as a result of the depreciation of the Shilling. Scarcity of Dollars normally leads to a sharp upward fluctuation in the exchange rate and in such situations, the Central Bank normally intervenes by injecting more Dollars into the market.

Even as it emerged that the public agencies in question are making losses, officials from the Auditor General’s office are investigating reports that the chief executives in these companies continue to receive performance-based bonuses worth billions of shillings each year.

Details from the Auditor General indicate that as at June 30, 2012, BoU’s capital, excluding translation reserves was a deficit of Shs.226 billion (2011: Shs116 billion). The capital has since been eroded mainly due to operating losses and accordingly, the capital is impaired and requires redemption from the government in accordance with section 14 of the Bank of Uganda Act.

Analysis of performance of the public organisations audited by the Auditor General has revealed that some entities have been operating profitably while others have been operating at a loss.

‘No need for panic’
According to the Attorney General, the financial standing of these entities was evaluated based on the reported accumulated surplus or deficit as at June 30, 2012, December 31, 2011, October 31, 2012 or September 30, 2012 depending on the relevant financial year-end of the entities. “The financial statements of entities I audited revealed that 16 public organisations made losses totaling Shs659.8 billion,” said Mr John Muwanga, the auditor general, in his 2013 annual Report to Parliament.

“A total of six of these organisations had gross accumulated losses from prior years, a red flag position that indicates a need for timely corrective action to reverse the trend.”

Speaking on behalf of the Finance Minister Maria Kiwanuaka, whose docket supervises Bank of Uganda, Mr Jim Mugunga said: “The Auditor General’s findings notwithstanding, the Governor and Ministry of Finance have prudently managed the Bank and there is no reason to panic. We are talking about the Central Bank of Uganda with reserves abroad, there is no way this bank can go bankrupt.”

Mr Mugunga, the Ministry of Finance spokesperson, said the ministry would study the issues raised in the Auditor General’s report to establish why some public agencies are making losses. “As for other loss-making agencies, we are taking the matters raised in the report seriously and as a ministry we are going to study the report and we will respond accordingly.”

When contacted, BoU’s director of communications, Dr Jan Tibamwenda, promised to email this newspaper but by press time he had not done so.

OTHER GOVERNMENT LOSS-MAKING ENTITIES

State Enterprise Surplus/(deficit) in Shs Total Surplus/Deficit in Shs
Bank of Uganda (BoU) 600,426,000,000 1,168,661,000,000
National Library of Uganda 3,132,559,876 6,397,853,714
PPDAA 441,278,428 2,608,783,472
Uganda Property Holdings Ltd (UPHL) 120,043,398 381,425,450
Uganda Wildlife Education Centre 288,711,450 6,713,188,512
Broadcasting Council 41,572,867 309,708,860
National Youth Council 106,864,534 447,328,281
National Council for Disability 11,668,139 36,607,101
National Council for Children 28,718,429 26,161,369
NEC Tractor Hire Scheme Limited 863,468,200 2,112,378,032
Amnesty Commission 55,776,950 69,300,843
MTAC 139,318,376 332,627,666)
NHCC 73,679,000 73,726,832,000
Electricity Generation Co Ltd 19,926,115,000 131,244,280,000
UETCL 34,173,687,000 66,548,474,000
Nakivubo Stadium 59,363,219 35,480,131,408
Total 659,888,824,866
Source: 2013 Auditor General’s ReportKaberamaido