Newly-appointed BoU Governor, Mr Michael Atingi-Ego reacts as he appears before Parliament's appointment committee on February 11, 2025. PHOTO/ DAVID LUBOWA
It is now clear that when the Parliamentary Appointments Committee vets and approves Dr Michael Atingi-Ego as Bank of Uganda and Prof Augustus Nuwagaba as the deputy governor in the coming days, they have their work cut out.
The likelihood that the two men will pass the approval test in Parliament is high. In many countries the world over, the central bank has the mandate to preserve price stability as its single or primary objective and has been granted autonomy from the government to make sure that short-term political considerations do not interfere with achieving this objective.
Accountability to the legislature and the public at large balances the central bank’s autonomy. Transparency – the third element of the modern paradigm of central banking – is important for holding the central bank to account, and for making monetary policy efficient by shaping inflation expectations.
In principle, there is a clear division of responsibilities and accountabilities between the central bank on the one hand, and the government and the Minister of Finance on the other hand.
Even so, information sharing, cooperation, and coordination between the central bank and the government are important in a number of respects.
The duo will take over offices when two transactions that were related to debt service payment of $ 6.134 million to the World Bank, were stolen from BoU and paid to a company called Roadway Company Limited through a bank in Japan called MUFG on September 12, 2024.
The second transaction was meant to be a payment to the African Development Fund of $8.596 million. It was instead paid to MJS International London in the UK on September 28, 2024.
Upon discovering that the payments had not reached the intended beneficiaries (World Bank and African Development Fund), BoU immediately commenced internal investigations and reported the matter to relevant government agencies, including the Uganda Police Force, and Financial Intelligence Authority.
BoU also took necessary steps to recover the funds, instructing our Correspondent Bank, Citibank N.A., and the banks where the funds had been wired to freeze the said funds due to suspected fraud.
The BoU has since recovered $8.205 million of the funds sent to MJS International, London, UK, which has been credited to the Consolidated Fund Account in BoU.
The Bank of Uganda is still pursuing the balance of $391,660.45 through the Correspondent Bank.
The incident that followed this event is that nine senior officials from the Ministry of Finance, Planning, and Economic Development have since been charged over their alleged involvement in corruption, electronic fraud, and money laundering in connection with a hacking incident.
The duo also comes to the office when some of their security systems to ensure black market currency printing and smuggling into the country ends. For instance, memories of a chartered plane carrying extra pallets of new Uganda currency notes landing at Entebbe Airport with new currency notes and disappearing within Uganda are still alive.
The question that may arise is should the central bank should compel the Secretary to the Treasury or the ministers to first verify any payments to be made to the central bank to avoid such incidents in the future.
It is anticipated that in carrying out its supervisory role in the banking sector, the central bank team should also ensure high levels of accountability, to avoid questionable decisions in future.
The one decision that Ms Justine Bagyenda made to clear the closure of three commercial banks without valuation reports raised concerns in the parliamentary probe of the closure of banks headed by Abdu Katuntu.
The banks closed included International Credit Bank (ICB), Cooperative Bank, and Greenland Bank, according to testimonies, breached provisions of the Financial Institutions Statute.
From the policy development perspective while Uganda has made significant strides, challenges remain in attracting international investors the duo faces a tough task to help steer the financial market amid geopolitical tensions and global economic instabilities pose risks, particularly as 12-15 per cent of Uganda’s domestic debt is held by non-resident investors.
This requires policy to ensure that Uganda’s tax regime is reduced to put the country on par with the East African Community countries in attracting foreign investors.
They will have to ensure that there is Product Diversification in Uganda’s financial market and market Stability since the Geopolitical tensions and global economic instabilities pose risks.
Mortgage Refinance Bill: The Draft Mortgage Institutions Refinance (MRI) Bill was approved by the Cabinet in November 2024 and is undergoing final review by the Bank of Uganda in collaboration with the Ministry of Justice and Constitutional Affairs.
Some hope that once published in the Gazette and tabled before Parliament through the MoFPED, this bill will unlock long-term capital and liquidity by enabling the issuance and trading of mortgage-backed securities.
It will also establish a Mortgage Refinance Company, enhancing access to affordable housing finance and deepening the capital markets.
A Unified East African Financial Market: this means that the newly appointed central bank governor and his deputy will be working with regional central banks to fast-track the East African Monetary Union, harmonizing financial markets across the region.
A Deep and Liquid Bond Market, which aims to develop a diverse range of fixed-income products, including green bonds, Sukuk, and infrastructure bonds, through the Uganda Fixed Income Market Committee.
Sustainability Integration Environmental Social Governance (ESG) principles will be fully embedded in Uganda’s financial system, with robust ESG governance, sustainable finance, and reporting frameworks.
Broadening Investor Base: Initiatives like Okusevinga will increase retail investor participation, which currently stands at 5.3 percent of outstanding stock, up from 4.4 percent in 2023.
Clean Netting Jurisdiction: The Uganda Netting Bill, currently in development, will affirm Uganda as a clean netting jurisdiction, enhancing investor confidence.
Pension Sector Reforms: Engaging with the Uganda Retirement Benefits Regulatory Authority (URBRA) and the MoFPED to unlock the pension sector’s potential, securing the future of Uganda citizens.
While the central bank has done well in maintaining price stability, the outcry of high interest rates continues to be a big headache to the central bank as the financial institution's response to its monetary policy decision takes a long.
Universal financial inclusion: The cryptocurrency is also another issue that the new governor and his team will have to deal with since the digital currency is taking shape.
