By Moses Bekabye

In view of the misinformation surrounding the matter of boosting the currently distressed local companies, including in the local press, I have taken liberty to circulate for your information the actions agreed to by Government on this matter. Actions currently underway include the following:

  1. Recapitalization of Uganda Development Bank (UDB), starting with UGX 50Bn next quarter of this FY. Initially, the NSSF had proposed to MoFPED that the Fund had money to boost the capital base of UDB but later withdrew the proposal after finding it unfeasible.
  2. Immediate payment of domestic arrears-funds have already been provided for this purpose in the Q1 release. PS/ST has already issued a circular to all MDAs to prioritize payment of domestic areas.
  3. A Cabinet Paper is awaiting Cabinet consideration on resolution of the issue of South Sudan Suppliers.
  4. The Minister of Finance, Planning and Economic Development is engaging relevant stakeholders and contractors on immediate steps to be taken on the Issue of Local Content, while a comprehensive framework is worked out.
  5. Uganda Bankers’ Association (UBA) has embarked on the development of the Asset Reconstruction Company (ARC) to operate independently, which BOU welcomes and shall assume a supervisory role. A separate legislation may be required, and MoFPED is working with UBA to establish the requirements.
  6. BOU has issued a circular to all BOU Supervised Financial Institutions (basically banks) to ensure that consumers mandatorily sign Consumer Protection Guidelines and Key facts Document (in order to protect their interests).
  7. BOU has agreed to enhance the existing Financial Consumer Protection and Financial Literacy initiatives.
  8. On the disposal of collateral by commercial banks and acceptability of valuation done within 6 months by banks, the BOU will advise the Uganda Bankers Association (UBA) to engage in dialogue with the Institute of Surveyors in Uganda which accredits all valuers of properties in Uganda to resolve the problems raised by the borrowers (to reduce cost to borrowers). BOU agrees that at a minimum, there should be a period within which a valuation report of assets done by professional valuers accredited by the Institute of Surveyors of Uganda should be acceptable across banks.
  9. BOU will issue a circular to all Supervised Financial Institutions to desist from the practice of overcollateralization of bank loans.
  10. BOU has agreed to increase the staffing level of the Complaints Handling Desk in the Bank.

The details are included in the response from the Bank of Uganda Governor, available on request. I want to emphasize that the agreed actions in the attached matrices do not have any proposal for a cash bailout, an issue that has been grossly misrepresented in various sections of the population.

Moses Bekabye

Technical Advisor for Economic Affairs, MoFPED.