Uganda’s new central bank leadership faces crucial decisions even before they settle in.

Dr Michael Atingi-Ego, the former deputy governor of the Bank of Uganda (BoU), was appointed governor of the central bank in February. Professor Augustus Nuwagaba, a former lecturer at Makerere University, will be his deputy after being appointed by President Yoweri Museveni.

Their paths to the banking regulator were divergent. Although the two were successfully vetted by Parliament last month, Prof Nuwagaba is yet to take office as State House is yet to release his appointment letter, The EastAfrican has learnt.

But how they deal with Uganda’s monetary policy is the question they face anyway. The new leadership faces high lending rates. It also faces the critical strategic question of how to promote economic growth through financial sector supervision.

The BoU’s strategic policy direction during the tenure of Prof Emmanuel Tumusiime-Mutebile, who passed away in January 2022, was geared towards strong foreign exchange management, sound banking supervision and tackling high lending rates.

He succeeded in stabilising exchange rates and strengthening supervision of commercial banks. He, however, failed to tame the persistent high lending rates charged by the banks.

The BoU’s version of dealing with lending rates was to issue more banking licences and introduce credit bureau services. This has yet to pay off.

Before that, during the tenure of Professor Tumusiime-Mutebile’s predecessor, Charles Nyonyitono Kikonyogo, the central bank's policy agenda was tied to fighting hyperinflation and liberalising the foreign exchange market. Kikonyogo retired in January 2001 and died five months later.

Uganda’s headline inflation had fallen from around 60 percent in 1986 to around 20 percent before Kikonyogo’s departure. The foreign exchange market had been liberalised in 1991, paving the way for the licensing of private foreign exchange bureaus.

On the other hand, Kikonyogo’s tenure was partly marred by significant commercial bank failures that hit the Ugandan economy in the late 1990s. This banking crisis was attributed to severe mismanagement and depleted capital levels in locally owned banks. It saw the closure of Greenland Bank, Teefe Bank, International Credit Bank and the Co-operative Bank Limited.“I don’t expect too many changes at BoU because the new governor has been around for some time and has a strong sense of continuity in the job,” said Grace Kavuma, chairperson of the board of NCBA Bank Uganda."He carried out some drastic internal changes last year and did pull it off quite well. BoU has already provided us with new environmental, social and governance (ESG) guidelines, which appear reasonable and understandable, but as to how much of these we can implement, I don’t know.”Samuel Mwogeza, acting chief executive officer at Stanbic Bank Uganda, said the appointment of the new governor bodes well for the markets in terms of future direction of monetary policy, particularly on the central bank decisions, exchange rate movements and inflation curve management.“But his biggest challenges lie in tackling cyber fraud risks in the local economy and rebuilding foreign currency reserves. There is also a need to guide commercial banks on how to maximise returns from higher capital levels implemented last year,” says Mr Mwogeza.

Although Dr Atingi-Ego’s appointment reassures foreign donors, having worked at the International Monetary Fund (IMF), his ability to deal with the negative spillover effects of local politics against economic fundamentals is less tested.“He has done fairly well and truly deserved the promotion. The core policy management goals for the governor’s office are controlling inflation, exchange rates and financial sector supervision. He has done very well on all those indicators,” observed Benedict Sekabira, a retired BoU employee.“His biggest test lies in controlling inflation during election season that is caused by printing new money, government borrowing from the central bank or borrowing from other sources at the wrong time.”Some analysts say the new governor’s biggest policy priority should be to promote self-reliance in the economy by finding ways for the government to tap into valuable resources held by local pension schemes to fund government projects and minimise on donor reliance.“Some of the regional banks have already adopted ESG (environmental, social, and governance) standards in their home markets and might find it easy adapting to a new green compliance regime in this market,” said Paul Sine, chief executive officer at PMTS Limited, a distributor.

He was referring to the international framework that helps investors and businesses understand and measure a company’s impact on the environment.“But the bank supervision function at BoU remains top notch going by East African regional standards,” he added.

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