BoU: Cash pallets, spare parts and why we are all high from sniffing boat glue

Thursday June 27 2019


By Daniel K Kalinaki

The Central Bank was back in the news for most of last week over claims, originating from official sources, that extra currency notes had been printed in Europe and furtively flown into the country.
The flight cargo manifest was brought out and examined item by item. Pallets were counted and recounted. Homes and offices were raided, or not raided. Documents were seized, or not seized. People sniffed boat glue. Experts in freight forwarding, customs procedures and cargo clearing stepped forward to enjoy their 15 seconds of fame.

A nation took off its trousers, shook them to see if any spare change would fall out, and hasn’t fully put them back on. MPs, back in session and eager for some action, lustily begged for a chance to have another go at the Bank. One could almost imagine a mob outside the bank on Kampala Road; some baying for blood, some for a chance to personally inspect the vaults!

Even the media, not letting the facts get in the way of a good story, careened from one extreme to another, breathlessly reproducing one fantastic account after another without stopping to catch our breaths and ask if it all made sense. It didn’t.

The facts of this one-minute phantasmagoric orgy are an anti-climax: Someone cuts corners to save or make a buck and bulks up sensitive cargo with other cargo. Over-eager, trigger-happy investigators on the look out for brownie points leak the information, different versions from official sources add fuel to the conspiracy theory fires and voila! Onto the next one.

The Executive does not need to print bank notes surreptitiously when it can walk into BoU’s vaults with a trolley. It did so a decade ago when it spent $750 million on fighter jets without parliamentary approval, and has done on the oil tax bounties.

MPs should know this: Not only did they investigate that fighter-jet ‘break-in’ at the Central Bank for which they extracted a half-sincere “oops, sorry!” from the Executive, they continue to appropriate supplementary budgets every year for money that has already been spent. An Executive that can spend at will need not print and smuggle in extra notes. In fact, the only reason it would investigate such a claim is to keep out private sector players seeking to get in on the action.


It is now clear that Governor Emmanuel Tumusiime-Mutebile (ETM) has a great future behind him at the bank. ETM has been at the heart of the economic reforms over the last 30 years and on its core function – to manage inflation – the Central Bank has done a solid, commendable job. But it appears that on administrative matters, including the supervision of commercial banks and independence from the Executive, liberties were taken and corners cut.

The latter is particularly sad because while the inquiries focused on what went wrong and plenty went wrong in the handling of ailing banks, for instance – no attention was paid to the useful but boring facts: That BoU learnt some useful lessons from its mishandling of the 1990s banking crisis and transitioned to trying to keep ailing banks alive whenever possible. No depositor has been left out of pocket in more than a decade.

In retrospect, the Governor’s appeal to the FT over the jet fighter purchase was less a demonstration of independence and more of a cry for help, which went unheeded. Having failed to trigger intelligent debate, the challenges in the Central Bank have been turned over to Monday morning quarterbacks.

Ideally, the current ‘crisis’ at the Central Bank should lead to the appointment of a new Governor to close the administrative loopholes while maintaining the bank’s fairly decent track record of managing inflation.

It should also allow for targeted policy reforms to guarantee BoU’s independence while also making it more transparent and accountable. A single, non-renewable seven-year term, for instance, could give a reformist Guv’nor space to clean house. Publishing BoU’s books and board minutes would help with the latter.

Crucially, as the architects of the unbridled economic liberalisation gallop off into the sunset of their lives and careers, this is as good a time as any to re-examine some long-held theories (eg the State’s role in the economy) and practices (eg domestic borrowing for fiscal purposes, and its attendant negative consequences).

Parliament would be a good place to hold this debate, but alas! It is easier to discuss pallets than policy, and reviewing CCTV footage is more exciting than setting observable variables such as price-level targeting. If we really need useful answers we must ask the right questions.

Mr Kalinaki is a journalist and a poor man’s freedom fighter.
Twitter: @Kalinaki.