Financial mismanagement written into Uganda’s law

Our financial mismanagement syllabus is written into law and unless it is arrested soon will have even more serious consequences...

President Museveni’s 4th electoral term has run into several challenges. The core brand is impaired: strong on national defence, astute on the economy and striking the right balance on free giveaways clothed in populist messaging carrying along with donors and other apologists for a failing economy.

While most political battles are expected, the country is sharply divided on many issues. Some political factions want more centralised control of the government, others a more militarised oversight of core government functions. A failing grade on the economy and public finances is an existential national security threat.

The apex of our economic system is managed by two relatives: the Ministry of Finance and the Central Bank. The Ministry of Finance writes the budget, disburses funds to government departments, sets fiscal policy and targets, collects economic statistics, manages foreign investment, oversees the insurance sector, is in charge of core government assets.

The Minister of Finance is also responsible for NSSF. Policy responsibilities for the Minister extend to the national census, the National Planning Authority and other mind-numbing details.
The Central Bank is the government’s banker. It disburses facilities on behalf of its client, the Government of Uganda, and regulates the banking sector. BoU prints the currency, manages foreign exchange reserves and is responsible for stability of the national currency. It collects a myriad of economic data: production, price indices and so on.

The Central Bank’s role carries other responsibilities like issuing debt on behalf of the government, receipt of government revenue on the Consolidated Fund - funds once received cannot be spent without authorisation of Parliament. There are a number of other classified tasks that BoU carries out within the financial system but these are for another day.

Over the years, other players have vanished from the scene. Flagships under the Ministry of Trade and Industry like the Uganda Development Corporation, Management Training and Advisory Centre are all pale shadows of their former selves. Uganda Development Bank and Uganda Investment Authority would probably reside here but the latter, like many institutions, has succumbed to outright fraud. For sometime, the marketing of coffee and cotton fell under this ministry but this is no more. In some countries, this ministry is the most important ministry.

The Minister of Labour today is lumped with other unrelated dockets: Culture, Gender, Elderly Affairs, Youth and Children. Our Ministry of Labour has not been able to constitute an Industrial Court, the last appointee ran away from the job to the High Court. Long a cash cow for the cash-starved ministry, removing NSSF from the Labour docket cemented its decline as a ministry. The Cabinet ministers posted here are sent to “relax” after a bad day in the political mainstream.

Therefore, when systems fail at BoU and the Ministry of Finance, the risks to the wider economy are much greater. Warehousing so many functions under one roof is a great hazard when fire breaks out. That opinion described the failure of great proportions in the Office of the Prime Minister, home to 17 departments and policy functions hived off other ministries.

When either unit makes a bad judgment call, the risks are great. In the case of the Central Bank, abetting the financial profligacy of its client, the government, has wreaked its reputation. People need to believe in the Central Bank. By abetting abuses of the national vault, the Central Bank can lead to the collapse of the economy in hours if not minutes.

In the face of runaway inflation last year, BoU took its big stick and whacked the backs of thousands of ordinary borrowers whose shilling denominated loans ran through the roof causing widespread business failures.

At the Ministry of Finance, the obsession with micro-management continues to rear its head. The Ministry controls the government payroll. You would think there would be an excuse to house this function at Public Service, which kept pensions but does not manage core payroll. Cash management tools mean most of government runs like an ATM.

The ministry for sometime published quarterly releases as a political tool to foster accountability until the releases became so irregular it was risky to publish them. In any case as we now know, insiders have gotten the better of the system using sophisticated tools to control keys to the vault.

The Ministry of Finance is not entirely to blame. This design is a favourite donor design. Starve the body parts in order to keep the brains supple. In emergency medicine, brain-induced comas are supposed to help the rest of the body heal while limiting the brain function. In Uganda, we have the reverse; the brain is so busy it has run itself into a jam.

Our financial mismanagement syllabus is written into law and unless it is arrested soon, will have even more serious consequences for this fragile economy.

Mr Ssemogerere, an attorney and social entrepreneur, practises law in New York.
kssemoge@gmail.com