Sh150b injected in national ID project, MPs told

May 01, 2012

The Government borrowed money from Bank of Uganda (BOU) to finance the national identity card project that has never taken off, Parliament has heard.

By Joyce Namutebi

The Government borrowed money from Bank of Uganda (BOU) to finance the national identity card project that has never taken off, Parliament has heard.

Todate, the bank has processed payments totalling to over sh150.2b (51,042,730 euros) to Muhlbauer High Tech International, the German firm contracted by the Government to supply and install equipment for production of the identity cards.

The bank’s deputy governor, Louis Kasekende, however, stressed that the bank played no role in the process of procuring the company or the equipment.

He was appearing before the defence and internal affairs committee to explain the role of the Central Bank in the project dubbed the national security information system and to clarify on payments made.

Kasekende also had to respond to queries raised by the Auditor General in his report for the year ending June 30, 2011 in regard to the payments.

The MPs are concerned that although the project was launched by the President early last year, citizens have not received their national identity cards yet.

Kasekende explained that on March 30, 2010, the governor received a letter from the finance minister, requesting BOU to make payments to Muhlbauer on behalf of the Government in respect of the about sh212b in accordance with the schedule stated in the agreement.

This was to enable the Government to meet its contractual obligations that required an upfront payment before any equipment could be bought by the firm.

The bank, he said, was to be notified by the permanent secretary of the internal affairs ministry whenever payments were to be made.

Kasekende said the finance minister had requested that Euros 23m be paid immediately on submission of an advance payment guarantee from a commercial bank that was acceptable to BOU.

He said payments made by BOU were to be fully reimbursed by the Government.

Kasekende explained that the initial Euros 23m (about sh76b) were to be reimbursed by the Electoral Commission and the subsequent payments by the Ministry of Internal Affairs from its 2010/2011 budget.

He said some of the payments made by the bank were effected before it received funds from the Government. Consequently, BOU extended short-term credit to the Government until it was reimbursed.

The Bank of Uganda Act allows the central bank to extend temporary advances to the Government up to a maximum amount of 18% of the Government’s recurrent revenue and to charge market interest rates on these advances.

The bank charged an interest of 8% on outstanding advances to the Government, which was the prevailing bank rate at the time the payments began, the deputy governor revealed.

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