Prof Emmanuel Tumusiime-Mutebile, the Governor of Uganda’s Central Bank who died January 23, aged 72, was the strange bedfellow who is largely credited with nudging President Yoweri Museveni, Uganda’s ruler for 36 years, into accepting the reforms that would return Uganda’s battered economy onto a positive growth curve.
While he was a deep insider who had even been awarded a medal for his role in the Fronasa struggle, the forerunner of the National Resistance Movement, Museveni and Mutebile were diametrically opposed when it came to the economic model that would resuscitate Uganda’s ailing economy.
Museveni was Marxist-leaning while Mutebile, espoused the Washington Consensus, a 10-point set of bitter-pill measures that the World Bank and IMF had begun to prescribe to cash-hungry distressed economies in the early 1980s.
Their clashes over policy, however, mostly took place outside the public limelight, in the safety of internal think tanks or high-level meetings at State House.
In terms of vision, Mutebile was on the same side with Museveni who had come to power ready with a 10-point economic and political agenda for mending the Uganda state. He was committed to seeing Museveni succeed but they disagreed on the methodology.
With inflation raging at nearly 300 percent towards the end of 1986, Museveni still insisted on a centralist approach with the state playing the role of provider the basic consumer goods, tight-fist control of the exchange rate and allocation of capital in the economy.
In one heated meeting at State House in 1987, Mutebile reportedly told Museveni that his proposals would work because government cannot distribute what it did not have.
Bank failure reality check
That statement was a reality check for everyone in the meeting and would mark a turning point in the balance of power between the socialists and the reformists in the nascent administration.
By 1992 Mutebile had so much influence that he was able to push through the reforms that finally unlocked Uganda’s potential.
Deregulation gathered pace with the freeing of the currency markets, the setting up a specialised agency to oversee tax administration and downsizing of the public service.
By 1993, divestiture from public enterprises had gathered pace. A fiscal disciplinarian, he with a large degree of success also introduced cashflow budgeting in an effort to match spending to available resources.
The latter half of the 1990s saw Uganda sink into a banking crisis as several financial institutions went into distress. A number of these had been set up by indigenous Ugandans and were seen as a necessary counterforce to an industry dominated by multinationals.
Tumusiime-Mutebile decided to kick them out of the market rather than continue throwing good money after bad money. That did not spare Uganda Commercial Bank, financial institution of significant emotional and social value to Ugandans. That action cast Mutebile as an agent of neocolonial interests since many people did not actually understand the depth of the problem.
It would also be an eye opener for him. Many people lost money in the bank closures. When he became governor at the central bank in late 2000, he devised a new approach under which depositors of failed banks would be transferred to the more solid banks while the toxic assets were taken over by the Bank of Uganda.
Giving Museveni rope
By the time he became governor, Mutebile and Museveni had established a point of equilibrium. Museveni would be given licence to go overboard on a number of occasions and Mutebile would deploy the monetary tools to mop-up the excess liquidity that often triggered a spike in inflation. Cases in point are the 2011 and 2016 elections when inflation surged back to double digits.
Mutebile’s major reform at the central bank was to adopt a new monetary policy that focused on manipulating interest rates as the major tool for controlling inflation.
He reasoned that in Uganda’s largely informal economy, you could not directly control money in circulation but you could achieve the same result by controlling the price of money. Industry players praise him for maintaining macro-economic stability.
“We have lost an economic visionary, fearless transformer, and nationalist whose life was spent serving his country with dedication. As Governor Bank of Uganda, Mutebile presided over a sound regulatory administration that saw our banking sector and economy at large, achieve unprecedented growth milestones,” Anne Juuko, the chief executive of Stanbic Uganda told The EastAfrican for this tribute.
“He was a strong believer in financial inclusion, empowering consumers of financial services and promoted an enabling environment that nurtured local talent to take up leadership positions in Uganda’s banking industry,” Ms Juuko added.
Point of divergence
Mutebile achieved so much within the government partly because of his assertive and candid nature but also because he was an insider who was protected by a close-knit circle around Museveni, from Kigezi region. He also knew when not to cross Museveni.
The most public points of divergence between them would come in 2014, when the idea of building a currency mint in Uganda was first floated with Mutebile citing the challenges of running such a facility among Uganda’s governance deficits.
He also opposed the printing of excess money to fund elections because of the associated inflationary pressures but never succeeded in stopping that from happening on two occasions.
Earlier in 2011, he went on record in an interview with the Financial Times condemning as “reckless” the raiding of the oil fund in 2010, to fund the establishment of a modern airwing for the military.
In the past four years, the bank has been in the spotlight over the closure of Crane Bank. The owners of the bank sued the central bank, securing court wins. And in 2020, the bank came into the limelight when it was claimed that excess currency, to the tune of Ush90 billion over above what had been officially ordered, was illegally printed and delivered into the country.
All that happened when Tumusiime-Mutebile was spending less time at the bank because of failing health. Investigations by multiple agencies found no evidence of illegal currency but the scandal claimed the scalps of several top officials including Mutebile’s then deputy, Louis Kasekende.
Original story on Monitor