Opinion: The government set a goal to achieve a middle income society by 2020. However, the lack of progress so far is alarming. The decline in our economy has been aided by various factors one of which is the private sector. But the same has been made inefficient by the economic conditions created by Bank of Uganda.
For this country to achieve a middle income status, some of the conditions were a system that supports healthy return on savings and a favourable cost of borrowing. Nonetheless, the average loan interest ranges between 22 – 25 which has caused low returns on deposits and thus low saving rates. Simply put, Ugandans are nowhere near a middle income society.
The central bank has been a big let-down for the economy in these hard times. Over the previous years, the value of the Ugandan shilling has fallen belligerently against most currencies including those of our neighbouring East African Countries. The prices of house hold commodities have shot up.
In 2010, Uganda suffered a dramatic rate of inflation. We saw the prices of commodities like sugar go as high as Shs10000. The Governor, Emmanuel Mutebile, with an introduction of a new currency, solved the mischief. He bragged of his accomplishment, making Ugandans forget that the inflation had gone up under his watch. Early this year the price of sugar increased from Shs3500 a kilogramme to Shs5000 and further to Shs7000 then back to Shs5000. That implies an unstable market and general economy.
As governor of Bank of Uganda, Mutebile has closed several banks namely; Global Trust Bank, Imperial Bank, National Bank of Commerce and most recently, Crane Bank. I would want to think that all this is the result of the negligence of the central bank. As one of its important roles, BOU is supposed to continuously evaluate and observe and regulate commercial banks. It should therefore be able to prevent financial scandals like that that hit the economy of recent.
Apparently, Mutebile was rather for years confident that Crane Bank was still a golden egg only to break it a few days later. That signifies incompetence! Perhaps the presidential adviser, Tamale Mirundi, was right to call for the current governor’s resignation.
The latest World Bank update on the Ugandan economy, states that the country has made progress to expand the financial sector. However, it also mentions the low levels of trust that the people have put in the strength of the financial institutions.
Who can blame them? With the governor gone crazy with closing commercial banks, including one of the largest, one cannot trust the firmness of Uganda’s banking system. The statement shows that the working population has put its trust in systems like Mobile Money (MM). 7 million Ugandans have registered themselves up for one of the customer friendly mobile money accounts. Billions of shillings are transacted over the mobile MM networks every quarter.
Precisely, the central bank is failing to perform its duties. The economy is faced with unstable market prices, high interest rates, poor saving culture, and low rates of deposits. Uganda was ranked 122 of 138 countries that have accessible financial services. What much more does one have to say?
Point is, Mutebile is only fixing problems instead of preventing them. Therefore, every time we make progress, we are set back by something that the central bank missed. Fixing is a miserable process! It just might be better if for once the government played its cards right, detect and prevent a problem instead of waiting to conduct a postmortem.
The closure of Crane Bank would have been avoided. It is hard to make one believe that the Central Bank that is meant to play the supervisory role in the commercial banking system failed to flag the reckless laundering of money over the years.
I am, for that matter in full support of the fellas that went ahead to sue bank of Uganda for having neglected its role. Finally, the people that are capable of it, are sucking up to the untouchables and holding them accountable.