Bank of Uganda: Violated Under Museveni, Its Future is Troubling.

ELIAS BIRYABAREMA


Kampala--In November 2006, the FDC leader, Col. (rtd) Dr Kiiza Besigye made public stunning Bank of Uganda, BoU, confidential documents he had obtained exclusively; revealing for the first time, according to Besigye, President Yoweri Museveni directly violating laws that shield BoU from political influence.

The documents that involved several internal BoU and Finance ministry correspondences and a letter by Mr Museveni showed how he personally directed the BoU Governor, Mr Tumusiime Mutebile to use money meant for servicing a European Investment Bank, EIB, development loan to salvage a collapsing company belonging to a crony, Mr Hassan Basajja Balaba.
Basjja Balaba Hides and Skins, the company in question, was threatened with foreclosure by its creditor Standard Chartered Bank and the BoU, under Mr Museveni’s pressure, used money from the so called Apex Reflows Account which was part of the Consolidated Fund to pay the company’s Shs 20 billion loan.

This revelation was extraordinary in many ways but most importantly it offered the public a surprising window into the storied and befogged edifice that is BoU. At once it revealed a troubling vulnerability to politics that many people had never thought of, trusting as they did in the robust constitutional protection against executive interference in the Central Bank’s performance of its obligations.

That naivety might seem excusable. Exteriorly BoU has for long projected an image that innocently resembled what in fact the institution should be —a Central Bank acting independently to manage the country’s financial system and microeconomic stability. There was scarcely any hint the Bank had become deeply enmeshed in Mr Museveni’s far-reaching web of political patronage and Besigye’s astonishing disclosures led many to take in some heavy breath, unable to comprehend what they were reading.

And yet the Basajja scandal, even with its record-setting scale, seemed to be the tip of the iceberg—a fact that was underscored by FDC’s call for an inquiry into the (mis)management of the Consolidated Fund for the last ten years. And as if to affirm the urgency of FDC’s call, as the full length of the Basajja swindle was still unfolding, it was also coming to light that BoU had also lost over Shs 24 billion in politically-influenced loan guarantees to a bogus Sri Lankan textiles investor, Mr Velupillai Kananathan of Tri-Star Apparels.

While BoU is supposed to operate independently, behind-the-scenes president Museveni has pulled the levers, with its working bearing his imprint in ways far more extensive that most people realise or may ever believe. Getting his wishes implemented by BoU has been particularly easy, in a large part due to what you may call “friendly forces.”

It’s worth noting that the director of BoU’s Development Finance Department, which was administering the Apex Reflows money was Naomi Nasasira—wife of Eng. John Nasasira. Mr Nasasira is Mr Museveni’s Minister for Works and Transport and one of his fierce loyalists and longest-serving cabinet members.

And this hidden but strong relationship between the Central Bank and President Museveni, which is setting odious precedents, will deeply impact on this institution’s future functioning and partly determine how Mr Museveni’s successor government might relate to it.

Will BoU be able to recapture its diminished integrity in a post-Museveni Uganda? Can it regain its constitutional autonomy and execute its mandate free from the corrupting influence of the executive? If Uganda’s political actors and general population is disgusted with Mr Museveni and his thieving NRM regime and is looking forward to a hopeful post-Museveni Uganda: these will be some of the questions that will have to be pondered, particularly in the wider and vital debate of ideas on how to rejuvenate and clean up key state institutions.

BoU’s spending of the money that was subsequently lost to Basajja and Tri Star was as reckless as it was illegal. Parliament and the Auditor General, two authorities supposed to monitor and authorise all drawings on the Consolidated Fund never sanctioned it.

A researcher at Makerere University-based Economic Policy Research Centre, Mr Lawrence Bategeka reasoned that while Mr Museveni has not been exemplary in guarding BoU’s independence, neither has he sought to ride roughshod over it.

“I can’t see any single incident when Mr Museveni has flagrantly violated the independence of the Central Bank,” he said. Even when he has intervened, Mr Bategeka said, it has been largely to use it to influence the course of the nation’s economic policy when he thought it had derailed.

Central Banks for instance, according to Mr Bategeka, have long expanded their role from their traditional focus on the narrow aspects of financial regulation, interest rates and inflation to wider areas like spurring economic growth and development. That shift has meant that BoU’s can intervene actively to for instance stimulate the economy to create more jobs or buoy up distressed firms, something that may justify Mr Museveni’s influence of BoU and its spending of taxpayer money.

Such reasoning however would overlook troubling details. True, it might appear reasonable for Mr Museveni to use BoU to intervene in stabilising macroeconomic issues but not when he’s doing it illegally.

Secondly, even as it is being cast as benign, Mr Museveni’s breach of the independence of BoU might entice him (if it hasn’t already) into using the Central Bank to execute politically populist and imprudent economic programmes. Such a legacy might get entrenched by a future leader with disastrous consequences for the reputation of the Central Bank and the wider economy.

Deputy Secretary to Treasury, Mr Keith Muhakanizi argued in an interview that Mr Museveni actually is empowered by the constitution to act the way he did in the Basajja and Tri-Star disasters, describing his directives to BoU as “a policy matter.”

He, too, was cold to suggestions of Museveni’s interference with BoU, noting that if there had been any mismanagement of the Consolidated Fund, it was caused by bureaucrats acting on their own. “The problem is that when these people (public servants) fail or are caught in the wrong then they want to shift responsibility,” he said.

The letters from Mr Museveni to the Governor of BoU that Mr Besigye exposed though hardly corroborates Mr Muhakanizi’s assertions.

To be sure, Mr Museveni’s irregular dealings with the Central Bank have not been epidemic and they do not seem to be out of the bounds of aberrations that Ugandans have come to expect from the NRM administration. Nevertheless, if BoU doesn’t fight to retrieve its slipping independence, it could easily succumb to worse manipulation in a post-Museveni Uganda, foreshadowing disaster for the economy.

UPDF in a Post-Museveni Uganda: Hints of Hope and Upheaval.

ELIAS BIRYABAREMA



Kampala--From its founding in 1981, through the guerrilla battles to the seizure of power in ’86, transformation into a national army and then on to the current multiparty politics, the UPDF (formerly, NRA) has been run as a de facto personal army of President Yoweri Museveni.

Mr Museveni’s influence within the UPDF is so pervasive and overweening—or so he has made people believe—that most Ugandans have long understood it as nearly impossible for this institution to stand without him. And so there is a considerable measure of wonder and apprehension about the sort and extent of change, if any, that will sweep through the UPDF in a post-Museveni Uganda.

While it is true that the army has long shed some of its historical ties to Mr. Museveni and assumed a national character and visage, it still maintains lots of cultish loyalty and reverence for its founder and a great deal of the army command structures and functioning appear to spin around his personal authority that its unclear how that institution’s integrity will continue when its supposed centre of gravity (Mr Museveni) erodes.

In Ex Army Commander, Major Gen Mugisha Muntu’s prognosis, the UPDF can survive Mr Museveni’s political demise and grow even stronger but that that will depend on the evolving character of the force and factors influencing its internal growth and transformation.

There’s a growing cadreship of elite officers (highly educated, trained and modernist in outlook), Muntu observed, that is increasingly gravitating toward independent thinking and action and that if the future of UPDF is shaped by these officers then worries of an institutional breakdown after Museveni would be wanton. “Yes, they’re all these educated and inspiring officers in our military that are upcoming,” he said. “I think they represent the hope and continuity of our army.”

Encouragingly, too, the elongated stability of Uganda’s politics and the growing strength of some of the country’s democratic institutions and the spread of civil liberties—parliament, opposition parties, the media, civil society—is also cited by analysts to be quietly shaping the mindsets and general character of these officers. Increasingly a growing section within the military leadership, according to a source in the intelligence community, is inevitably realising that the army has little choice but to defend these young institutions and this epiphany will ultimately determine how the military behaves upon the exit of the founding Commander-in-Chief.


Be that as it may, plenty of hints here and there do not seem to point to a reassuring future. Another source within Mr. Museveni’s intelligence circle lamented the president’s persistent use of the army in his personal political manoeuvres, noting that the practise has now become so entrenched that it will take a long time to reverse.

In all the elections Uganda has had for instance under Mr Museveni—1996, 2001, 2006—the army has inserted itself (or has been inserted) right at the centre, with several senior raking officers actively conducting covert campaigns for President Museveni. The current coordinator of Intelligence Services, Mr David Tinyefuza and Maj. Gen Elly Tumwine overtly campaigned for President Museveni in 2001 and issued dreadful threats against his key opponent Col. Dr Kiiza Besigye. The same was reprised in 2006 elections.

For the UPDF to fully professionalize and gain sufficient national goodwill and support, so crucial for its continuity, it will have to unlearn a great deal of the anti-democracy lessons imparted by Mr Museveni and his strongman style of politics. That won’t be easy considering that most of the generals, supposed to re-orient and sanitise the UPDF are the same officers who have been harassing and brutalising political opposition members on behalf of president Museveni.

Their predicament is further complicated by the fact that their participation in Museveni’s machinations is itself done in self-interest since through maintaining Museveni’s dictatorship they perpetuate their own impunity.

There are decidedly less explored undercurrents that will nevertheless prove crucial in the future of UPDF. It has been politically incorrect for the media in Uganda to debate the longstanding accusations of tribal marginalisation in the military. Lately though, these incendiary accusations have been amplified anew by disaffected elements within the NRM. And official denials have appeared to inflame it further by inviting closer scrutiny of the tribal composition of the army. Mr Museveni’s perennial justification for the Bahima’s predominance in the army has been that they initially formed the nucleus of the NRA but after 22 years of little or no change, many are now dismissing this argument as a smokescreen for his sectarianism.

The pandemic of grand corruption in the army, one of Mr Museveni’s most hideous legacies will for long retard the growth of UPDF and there’s expected little change when he leaves power. The embezzlement of vast sums of money in payments of phantom troops, procurement of arms and even diversion of salaries for real soldiers have resulted in the perpetuation of critical capacity limitations. The consequences of this corruption have been colossally tragic as in the army’s failure to end the war in northern Uganda.


Few expect this state of affairs to change in a post-Museveni Uganda. But the cost of failure to end army corruption will probably be greater than what the nation has paid so far.

It could continue weakening the military up to a point where it’s vulnerable to upheaval and in a post-Museveni Uganda that point could come closer far faster than many can imagine.