Message: Tighten your belts, the economy in free fall
Background: Officialdom is deceptive. The flowery statements made by government officials and diplomats are usually empty or deceptive. The people making those statements usually know the truth, but choose to lie for one reason or another.
That waa the case with Bank of Uganda Governor Emmanuel Mutebile when he issued an economic report for October month, painting a rosy picture.
He was lying.
These past weeks, Mutebile and the Central Bank have proven to you that you cannot rely on them. You can’t take their word to the bank and cash it.
From assuring the public that Crane Bank was okay to issuing a clean bill of health for the economy which we all know is sick to the extent of taking down the fourth biggest bank.
You may well understand how Uganda’s tycoons were asking for a bail out from the government a couple of months ago. They reported that banks were going after their properties after they failed to pay back their loans. The bank they meant was Crane Bank.
The government reportedly told them there was no money. The blame was put on the banks that hiked interest rates. No one blamed Bank of Uganda for failing to regulate the banking sector.
Now, take it from me that Crane Bank is the leading lender to Uganda’s businessmen. The bank had a flexible regime where businessmen could easily borrow money to offset their obligations.
When the economy started biting, the businessmen failed to honor their obligations to the bank. Crane Bank started suffering.
Sudhir, the face of the bank remained quiet but hurting. They thought the government would bail them out. It didn’t. Government say it as if Sudhir was conning them.
So, the government calculated that it was better for one man to go down and government revise down the loans.
However, this is short term. Crane bank was a cushion for businesses that range from merchandise, real estate, schools to hotels.
So, the bank was not being sustainable. It has run from the most profitable to indebted.
Now when your lender runs broke, you soon become broke yourself, that’s if you didn’t run broke before the lender.
So, the tree hundreds of businessmen who employed thousands, were leaning on, has been felled.
1. Central bank should be more vigilant, ensuring strict adherence to the principles. The banks should separate ownership from management, which was the problem that befell Crane Bank.