By Kagenyi Lukka
The events of last week have made me toy with what to write about. I had to make a rather hard decision to ignore the political theatrics that played out at Magere and go back to a more meaningful conversation of national importance.
The role of a central bank in the economy of any country cannot be overstated. The soundness or unsoundness of any country’s economy has a thing or two to do with how the central bank is soundly or unsoundly managed. The central bank’s major purpose is to foster price stability and a sound financial system.
Section 4 of the Bank of Uganda Act outlines the functions of the bank which among others include; formulating and implementing monetary policy directed to economic objectives of achieving and maintaining economic stability, maintaining monetary stability, maintaining an external assets reserve, issue currency notes and coin, and being the banker to the Government.
Bank of Uganda (BoU) is however a shadow of what it is supposed to be. For over two years now, it has been a laughing stalk-Scandal after another, the list is endlessly confounding!
Whichever efforts we have to evoke, must have anything to do with redeeming the lost glory of BoU and saving its future from further uncontrolled retrogression.
Following three months of a grueling inquiry into the closure of seven defunct commercial banks by the Committee on Commissions Statutory Authorities and State Enterprises (COSASE), a report with a raft of recommendations was made and adopted by the parliament of Uganda. With reckless abandon, BoU closed Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), the Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and Crane Bank Ltd (CBL).
The Committee noted a number of inconsistencies key among them being closure and sale of the defunct Banks without any inventory or documentation and grossly undermining the legal procedures of bank closure by the Central Bank.
The univocal chorus sung by MPs across the divide during the debate on the Cosase BoU report showed a house desirous of a better managed institution as opposed to the current scramble and partition.
Since the adoption of the Cosase report, we have waited for cabinet to table the amendments on Bank of Uganda but to no avail.
Of late, it’s only Igara East Mp Hon Micheal Mawanda who has taken it upon himself to draft a bill aimed at amending the Bank of Uganda Act. The current Act creates a fusion between the management and the board of the central bank which has in turn made it hard to enforce accountability.
‘We hope it can solve all these impasses that have been happening in the bank from the sale of the defunct private banks, infighting among others. For now the board of Governors is reliant on each other and this brings out issues of accountability’.Mawanda told a leading daily.
Under Section 7 of the Bank of Uganda Act which creates the board of directors of the bank, makes the governor to be the Chairman of the board deputized by his deputy governor which means that the two chief executives report to themselves. In the current state of events, the two are involved in endless succession wars. Therefore, it’s only sober that amendments happen soonest.
The prime minister should mean and follow his word.
In a statement made during a debate on the report, on 27 February 2019, the Prime Minister, Hon. Ruhakana Rugunda said that he was happy that the probe brought to light several inconsistencies in the closure of the banks.
“When the local banks like the Cooperative Bank closed, the local people got a raw deal because they found it easier to deal with it as it was locally founded’.Rugunda said.
Rugunda added, ‘We agree for example that there should be separation of Central Bank supervision and liquidation into two departments to curb the inconsistencies that have arisen’.
Such remarks from the head of government business ought to be followed with action because without amendments that delink management from the board, attempts to create sanity at BoU remain wishful. The government should act immediately.
The author is a current affairs analyst and aspiring MP Ikiiki County in Budaka District.