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Uganda: Why Bank Must Be Investigated

The Monitor (Kampala)


19 January 2012


This Tuesday’s announcement by the FDC leader that Central Bank Governor, Tumusiime Mutebile, ordered the printing and pumping of Shs2 trillion into the economy (possibly as illegal election financing for the ruling party last year) has to be investigated.

Dr Kizza Besigye’s assertion, if true, may bring Ugandans a little closer to understanding the economic strife besetting their motherland.

In spite of the worldwide economic downturn, it would seem to suggest that a more sinister catalyst lurks behind the 27 per cent inflation rate that is driving everybody up the wall. Also, in that allegation may well be the explanation for Mr Mutebile’s single-minded determination to maintain a tight monetary policy, with an unseemly 23 per cent Central Bank Rate, all in the name of ‘mopping-up cash from the economy’.

A dismissive rebuttal from Bank of Uganda would be ill-advised as it could as well be interpreted to be part of a plot to sweep the rubbish under the carpet. A full, independent inquiry must therefore ensue.

Modern day economic theorists are belatedly coming to the conclusion that printing of money ranks as high as deficit spending amongst the bad boys. It has generally tended to lead to economic ruin.

Very recent examples of its failure are to be found in the reeling Western economies which tried to drag themselves from the brink by funding varied economic stimulus packages through printing of money and deficit spending. They are instead sinking deeper into what appears like the second phase of the financial crisis which began in 2007-08.

Spending money one does not have is insensible and unsustainable. Unless BoU can credibly prove that it has not again been party to a mischievous regime conspiracy, this information erodes whatever little confidence Ugandans still had in the managers of their economy. Unhappily, Besigye’s allegation dovetails with the regime’s appetite for dubious budget supplementaries, the most notorious of which being the Shs600 billion bull-dozed through Parliament just before the 2011 elections.

In political terms, the revelation could turn out to be more damaging than just a little embarrassment. It comes during a week in which the President was photographed roasting meat amidst party fat cats, while opposition politicians humbly dined in downtown Kampala where the masses quaff food at pocket-friendly prices.

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