Uganda’s Central Bank finds itself in an uncomfortable position, following scandals that are leading many to ponder the future of an institution that has over the years projected an image of integrity in the face of political influence.

Indeed, the legacy of Governor Prof Emmanuel Tumusiime Mutebile, who towers above peers as an economist with storied credentials, is in a precarious position.

The latest position arises from alleged illegal printing and transportation of currency that has government officials — from the Bank itself, the police, the media centre and a special anti-corruption unit based at State House—  entangled in contradictions.

SCANDALS

Some critics fear the scandals provide a window for the executive to gain more leverage over the Bank as it makes changes in powers and management.

The scandal comes barely five months after parliament reported that for the past 25 years, the central bank had been abusing its role of supervising commercial banks. In February, a parliamentary report recommended an amendment to the Financial Institutions Act to provide for better supervision of commercial banks.

But with a fresh scandal over the stability of Uganda’s monetary policy emerging shortly afterwards, observers say this now provides the government with the perfect excuse to set the stage for reforms, intended to hand more control of the central bank to the executive.

The news of Bank of Uganda, Uganda Revenue Authority and Civil Aviation Authority officials being arrested over printing of Ush90 billion ($24 million) was quickly spread by government officials, who later rescinded the story.

Prof Mutebile and Edith Nakalema, the head of the anti-corruption unit in the President’s Office, now say that investigations, are to do with the smuggling of cargo onto a plane chartered to fly in printed shillings from Europe.

On June 21, the Criminal Investigations Directorate formally charged two employees of BoU — Francis Kakeeto, 36, and Fred Wanyama, 42, — with abuse of office and corruption for failing to inspect printed material in France.

Prof Mutebile issued a statement noting that the problem lay with the extra cargo on the chartered plane.

Ms Nakalema said that the extra cargo belonged to 13 different agencies including the Ministry of Health, the United Nations and the United States Agency for International Development (USAid).

USAid said it is investigating the matter to rule out any form of wrongdoing on its part. The Ministry of Health said it did not   know the owners of the goods. The United Nations Development Programme on the other hand said it does not know which of its offices had goods on the chartered plane.

Legislator Muwanga Kivumbi reads mischief in the scandals, saying that they are intended to undermine the central bank so that the executive can gain more control.

He cited a case about two years ago when President Yoweri Museveni and officials from the Ministry of Finance supported the idea of starting printing the Uganda currency locally, plans Prof Mutebile opposed.

“They lost a deal worth half a billion dollars. This chaos opens the door for them to reignite this debate,” said Mr Kivumbi.

RESERVES

Bank of Uganda spends about Ush366.4 billion ($100 million) annually to print money. Since this is a sensitive area, companies in this business get a contract of at least five years.

Another area that could benefit the executive is the amendment to the law to allow it access to BoU reserves, said Mr Kivumbi.

The central bank is required to keep foreign exchange reserves worth at least three months of Uganda’s exports. These reserves are then used to shore up the shilling in case it loses value.

In 2018, the International Monetary Fund found that instead of borrowing from the domestic market, the executive had turned to the central bank, exposing Uganda to inflation.

This has also left the central bank in need of recapitalisation from the government, a move experts say compromises its independence.

 Mr Kivumbi added that the central bank’s need for recapitalisation has also been as a result of mismanagement.

He cited the 2019/2020 financial year when BoU requested Ush484.2 billion ($129.8 million).

The figure equals the amount BoU is alleged to have wasted when it took over the management of the now defunct Crane Bank. BoU denies the claims.

The closure of Crane Bank sparked controversy resulting in parliamentary investigations that recommended an amendment to the Financial Institutions Act.

Abdu Katuntu, who chaired the committee that investigated BoU’s winding down, said that they recommended that President Museveni rethink appointees to the board of directors, as they had failed in their jobs.

Mr Katuntu also wants some of the powers granted to Prof Mutebile and his deputy Louis Kasekende under the country’s Constitution withdrawn, arguing that the two have abused them.