In lieu of an abstract, here is a brief excerpt of the content:

In 1987 the Bank of Uganda hosted the biggest delegation from the International Monetary Fund that I had ever seen. I counted nineteen foreign delegates who filled the board room of the central bank, leaving our staff only a few seats. Governor Kiggundu welcomed them, and they said that they had come as a taskforce specifically assigned to do an initial investigation of Uganda’s financial sector. Although I had worked as a university professor in the United States and was quite comfortable sitting in a room full of highly skilled academics, I felt intimidated by the sheer number of these esteemed economists and financial experts from the IMF and their mission. Perhaps part of the intimidation came from the fact that in the hands of these foreigners lay the future of my country and my people. No matter how concerned they were about Uganda, they could not possibly appreciate, as did my fellow Ugandans and I, the type of suffering that would be imposed on the people of Uganda if we failed to bring stability to the banking and monetary system. In the case of failure, these foreign academics would most likely return to their jobs in the United States and proceed with other projects. For us at the Bank of Uganda, failure meant that the hardship of our people would be intensified and prolonged—an outcome that the NRM government had indicated was impermissible. Hence our fear and intimidation may have been associated with our desperate desire for the IMF experts to help us “grab the bull by the horns” and effectively transform the country’s anaemic banking system and turn it into an effective instrument for economic growth and development. After the governor of the Bank of Uganda welcomed the IMF delegation and indicated that I was to head the financial sector reform taskforce on Uganda’s side, our visitors dispersed to the various financial institu9 Financial Sector Reform: Negotiating with the Bretton Woods Institutions 62 09-2589-3 CH 9:Cels 2262-5 3/20/14 8:47 PM Page 62 tions. In about a week, they gave us a preliminary report of their findings and promised a final report after returning to Washington. When the final report came, it called for diagnostic studies of the financial sector, most especially Uganda Commercial Bank (then Uganda’s largest commercial bank) as well as the Uganda Development Bank and the Cooperative Bank. At a later date, a special study of the central bank was also to be undertaken. The diagnostic reports were produced by teams of external consultants. The results were alarming.The Uganda Commercial Bank (UCB),whose banking deposits were nearly half of all the nation’s total deposits, was declared “technically insolvent.” The Uganda Development Bank, the country’s main development bank, had made staggering amounts of unrecoverable loans and subsequently could not service its foreign debts, leaving the government to repay them under an arrangement whereby the government had agreed to assume all the bank’s foreign exchange risks. The Cooperative Bank was also insolvent and suffering from excessive fraud in its branch network. In sum, the Ugandan financial sector, as it existed at the time, was a total mess and cleaning it up required the government to take extremely radical measures. The Bank of Uganda under the Microscope The case for financial sector reforms in Uganda was quite clear. The initial focus of the reform was the central bank and the Uganda Commercial Bank. At the central bank, we reorganized the departments by function and created a new hierarchy of executive directors who became the highest officers of the bank and formed the top management team together with the governor, the deputy governor, and the secretary of the bank, who was also the secretary to the board of governors of the bank. The consultants (Booz,Allen, and Hamilton ) found the central bank seriously deficient in management practices and said so in their interim report. Their criticism displeased the bank’s governor, and he indicated to the consultants that he took exception to their rather high-handed comments and criticisms. Despite this initial conflict between the governor and the consultants, the report provided us with very useful information about the bank and its existing structure. For example, it was brought to our attention that there were departments in which a manager had one or two staff reporting to him or her. On the other extreme, there were departments, such as banking and currency, where a...

Share