Kampala: Legislators on the Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) on Wednesday afternoon grilled officials from the central bank over payments in foreign currencies to local suppliers.
Bank of Uganda officials including the governor, his deputy and other top bosses, were tasked to explain why they paid a law firm MMAKSs Advocates in foreign currency.
MMKAS partners include Timothy Masembe Kanyerezi and Apollo Makubuya.
The law firms which filed their invoices in Uganda shillings were instead by the central bank in dollars, contrary to standing orders from the Ministry of Finance.
MPs were baffled that the BoU did not have confidence in the Ugandan shilling, which was the reason for their preference to pay local suppliers in foreign currency.
On Tuesday, while appearing before Cosase, Timothy Kanyererezi Masembe, one of the senior partners, and a close associate to probed BoU officials, disclosed that his firm was paid USD 230,000 (approximately Shs759M) just to advise BoU during the liquidation period of Crane Bank.
The exit meeting which kicked off at 11:00 pm, commenced with BoU Executive Director Supervision of BoU Twinemanzi Tumubweine explaining how BoU injected Shs478bn for Crane Bank liquidation. Twinemanzi was responding to queries raised in the special audit report by the Auditor General on the Shs478Bn injected in Crane Bank as liquidity support by Bank of Uganda at the time the financial institution was under statutory management.
Twinemanzi admitted that Bank of Uganda had no guidelines for the liquidity support but agreed with auditors that there is need for the Central Bank to review its liquidation support guidelines including details of operating procedures for the said plan.
Twinemanzi insisted that Deputy Governor, Louis Kasekende approved all payments to Crane Bank’s liquidity support, although Kasekende said he did not remember that authorization.
Aruu MP Odonga Otto put Kasekende on the spot when he tasked him to provide the legal instrument he used to authorize such payments and minutes of the meeting on how they arrived at the figure.
“As a taxpayer in Uganda, am concerned of how Bank of Uganda(BOU) used Shs 478bn to recapitalize Crane Bank,” Otto wondered, adding that, “I would like also know how BoU arrived at that figure?”
Mbarara Municipality’s Michael Tusiime tabled a letter authored by Secretary to Treasury on 15th January 2016, warning all accounting officers from paying contractors in foreign currencies, save for contracts that were running before the time of the directive.
He then demanded the Central Bank team to explain why MMAKS Advocates was paid against the authority of Secretary to Treasury.
“I am still interested in the authority of these approvals especially the approvals that are in foreign currency. Section 15(1) BOU Act talks about the General Reserve Fund. The bank may in consultation with Minister transfer funds from general reserve fund to the capital of the bank.”
The Deputy Governor told the Committee that the Bank would fund the shilling account of Crane in Bank of Uganda as the Central Bank is the one unique institution where they can create a liability matched with the assets.
However, Tusiime insisted on having Dr. Kasekende explain why he paid local contractors when there is a ban from the Treasury to execute these payments in foreign currencies.
Kasekende however denied having a hand in the approvals saying, “I don’t think I am the one who approved it, let the officers explain the contract.”
Anita Among, Vice Chairperson Cosase wondered whether the Central Bank makes its budgets in local currencies to warrant it pay its local suppliers in foreign currencies.
Kasekende defended the Central Bank’s decision arguing that; “This copy of the letter was sent to central and local governments which doesn’t include Bank of Uganda. It was never sent to Bank of Uganda.”
With back and forth debate on the matter, the Committee requested the Central Bank to provide a written response.