The music in the Bank of Uganda lift plays ever so softly. In the hallowed corridors, staff walk with a measured tread, wave at strangers with unmistakable grin – and chat almost in whispers not to disrupt those busy in the next room.
This is perhaps what life means when one works for the most important financial institution in the country – take it slow but surely. But as the central bank finds itself being the focus of unflattering public scrutiny, and its activities the subject of various public investigations, the institution faces its biggest stress test.
Its formidable reputation, source of pride and biggest asset, totters on the edge. Reputation is key to command credibility in its supervisory role over the country’s money markets and banks.
Speaking in April this year during an informal dinner hosted at the plush residence of Citibank MD in Kololo, Governor Emmanuel Tumusiime-Mutebile said BoU had “attracted a great deal of unfair criticism in the media…[and] criticism of this nature, however specious, can damage BoU’s hard-won reputation.”
Years earlier, in 2015, a report by the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) indicated the central bank was one of the best-run institutions and applauded it as the best employer in the country.
This week, the same committee, led by Bugweri MP Abdu Katuntu, hammered at the institution as its most important men – Prof Mutebile, Dr Louis Kasekende, and Benedict Ssekabira – laboured to convince legislators that past banks’ resolutions were done within the law. An employee quietly told The Observer at the weekend: “the truth will set us free”.
The Bank of Uganda of today had managed to detach itself from the troubled past – a past of aristocracies, as described by former BoU director for research, Dr Ezra Suruma in his 2014 book Advancing the Ugandan Economy.
Suruma, who was to later be appointed finance minister, writes that when he joined the bank in 1987, he found a class of people that had access to foreign exchange, better salaries, were always paid on time, and had plenty while everyone else in Uganda tightened their belts. It was a real aristocracy with no equal measure, he writes.
“I realised that despite its reputation as a sound institution, the central bank was in a crisis of no accountability and very weak managerial capacity. Its ability to supervise banks had long ground to a virtual zero; it was a custodian and a victim of an overwhelming but unquantified external debt, and on top of all that, it laboured under an ongoing tension in its relationship with the ministry of finance,” writes Suruma.
Has this changed? The answer is affirmative but the bank still has to convince Ugandans that it is better now. Today, it publishes its accounts every year, the financial sector gives the impression of stability and it has helped keep inflation in check.
Yet some episodes that have happened since the turn of 2010 have brought the central bank’s reputation into question. The first was an astonishing admission in the foreign press by Mutebile after the 2011 general elections that President Museveni had led him to draw $740 million from the national reserves to buy jet fighters.
If anything, this showed the bank’s claim to independence could be impugned. Another incident came in 2013 when the bank controversially guaranteed the payment of Shs 142 billion in compensation to businessman Hassan Basajjabalaba and it struggled to recover the money back. Basajjabalaba is known to enjoy considerable political patronage in very high places in the regime.
Then, came a series of stumbles in succession – the funniest being the pens procured for the bank’s jubilee celebrations in 2016 with Sh 125 million spent on 350 pens used as souvenirs. Each pen was bought for a sobering Shs 357,000.
In a country where per capita income is just $670, the episode showed technocrats at the central bank were out of touch with reality, said one analyst. And then the 2017 procurement of land for the governor’s residence.
Two acres in the quiet Mbuya suburb for Shs 10 billion yet there were cheaper offers in equally, or more posh neighborhoods like Muyenga. That acquisition is still subject to an ongoing inquiry by the Inspectorate of Government.
This year, the firing of former director of supervision Justine Bagyenda and the ping pong between the bank and the IGG over whether the officials and the bank itself should be investigated, fuelled all sorts of speculation and mystery over what happens inside those posh air-conditioned walls along Kampala road.
Then the auditor general’s latest report lifted the lid, showing top officials there have questions to answer about seven commercial banks closed between 2000 and 2017, including Crane bank.
Mutebile has told parliament that the main objective of financial regulation is to maintain stability and soundness of the banking system. This, he said, would greatly be undermined if there is erosion of confidence in the key stakeholder – the depositors. But Suruma believes there has been a fault line in BoU’s operations, especially on accountability.
“It is essential that the bank itself be accountable to the public, perhaps to parliament, for its activities. This has been lacking,” he writes in his 2014 book.
“Currently, the governor reports to the board of directors, of which he is also the chairman. So, in effect, he reports to himself. The bank’s secretary is also the secretary of the board while the vice chairman to the board is the deputy governor...the board does not report to the minister of finance, the president, or parliament. In this sense, the bank is probably too independent and I don’t believe that it is in the interest of Uganda to have a public institution that does not have to account to anyone,” Suruma says.
This Monday, November 12, 2018 Mutebile spoke to MPs with uncharacteristic humbleness.
He said: “Honourable members, resolution of banks is a complex exercise and each bank being resolved has its own uniqueness. There are a number of challenges encountered during resolution. One of the main challenges is litigations by different stakeholders.
“We appreciate the heightened interest in matters surrounding the resolution of defunct banks, but our hands are tied and Bank of Uganda has to operate within the law.”
As the House inquiry proceeds with firmness, MPs remain resolute in their demand for full disclosure of what happened between BoU and those seven banks – invoking their constitutional and incontrovertible mandate to exercise oversight as representatives of the sovereign rights of Ugandans.