Members of parliament have piled pressure on Bank of Uganda (BoU) to explain why it has failed to recover Shs 140.487 billion linked to a loan guarantee issued to Haba Group Ltd nearly nine years ago.
The parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) has directed the central bank to furnish it with comprehensive documentation on the guarantee, including how it was issued, what due diligence was conducted, efforts made to recover the money and correspondence with the ministry of Finance.
The Shs 140.487 billion exposure is linked to the controversial compensation of businessman Hassan Bassajjabalaba and his companies after government cancelled leases they had obtained to manage several Kampala markets and Constitutional Square.
The government paid about Shs 142 billion in compensation, with the funds drawn from Bank of Uganda and backed by guarantees to commercial banks. The compensation was later challenged in the Constitutional court, which ordered Bassajjabalaba and his associates to refund the money.
The Supreme court subsequently quashed that decision, ruling that the Constitutional Court had acted outside its mandate by determining a dispute involving contested facts and commercial transactions rather than a pure question of constitutional interpretation.
MPs demand answers
Appearing before Cosase on Monday, BoU officials were pressed to explain why the central bank had not recovered the money nearly nine years after the guarantee was issued.
MPs noted that the issue only came to the committee’s attention after it was flagged in the Auditor General’s report for the 2024/25 financial year. BoU head of legal Dorothy Masifa Ochola told the committee that the guarantee enabling Haba to borrow from commercial banks was issued following instructions from the ministry of Finance.
She said the central bank had been engaging the ministry and its external lawyers, Max Advocates, on possible ways of resolving the matter, including pursuing court action.
However, Ochola admitted that BoU had not directly engaged Haba over recovery of the money and that no court case had been filed against the company.
“Court resolution is one of the options we have been looking at,” she said.
The admission angered MPs, who questioned why BoU had spent almost nine years corresponding with the ministry of Finance and consulting lawyers instead of taking concrete steps to recover the outstanding amount.
The committee also established that BoU had not obtained any security from Haba before the guarantee was issued. Ochola further failed to provide details of the company’s current directors and shareholders, saying she would need to conduct a fresh search to establish the information.
She said members of the Bassajjabalaba family were associated with the company but could not recall the names of all its directors. MPs questioned how BoU could fail to establish the ownership and current status of a company linked to a financial exposure of Shs 140 billion.
Who benefited from the money?
Cosase chairperson Muwada Nkunyingi said BoU could not continue relying on the ministry of Finance when the central bank, as a corporate entity, had issued the guarantee and was expected to take appropriate measures to protect public funds.
The committee also questioned what MPs described as conflicting explanations from BoU officials over who ultimately benefited from the money and who bears responsibility for repayment.
Ochola initially told the committee that the loan had been advanced to government and that government was responsible for payment because the guarantee had been issued on its instructions.
MPs, however, pointed to documents before the committee showing that the letters of comfort were issued in connection with Haba’s borrowing from commercial banks.
BoU Governor Michael Atingi-Ego said he was aware of the Shs 140.487 billion matter but asked the committee to allow the institution to provide a detailed written response.
He said previous Cosase committees had examined the matter and that BoU had continued writing to the ministry of Finance seeking settlement of the outstanding amount.
According to Atingi-Ego, the ministry of Finance instructed BoU to provide letters of comfort to commercial banks to enable them to lend to Haba.
The explanation, however, did not satisfy the committee, which said the 12th parliament had a responsibility to establish what had happened to the money and what action had been taken during the current audit period.
BoU sent back for documents
MPs also criticised BoU for appearing before the committee without the relevant documentation despite having been informed in advance that the financial transactions would be scrutinised.
Atingi-Ego asked for additional time to retrieve information from previous reports and engagements before providing a comprehensive response. Cosase consequently postponed the engagement and directed BoU to return with detailed information on the guarantee.
The committee wants the central bank to provide documents showing the circumstances under which the guarantee was issued, the due diligence conducted before approval, any security obtained, recovery efforts undertaken and correspondence exchanged with the Ministry of Finance.
Cosase also resolved to summon representatives of Haba Group, including Bassajjabalaba, to explain the company’s position and help establish its current ownership and status.