IT IS NOT NEW THAT PRESIDENT MUSEVENI ADMINISTRATION MAY COLLAPSE UGANDA COMPLETELY

Museveni, Mutebile clash over jets cash
By Monitor Reporter
Posted Wednesday, June 15 2011 at 00:00
Kampala
The Governor of the Central Bank says President Museveni’s erratic policies and the government’s fiscal indiscipline have led to higher inflation and declining foreign reserves, a UK-based newspaper reported.

Major contention
Mr Emmanuel Tumusiime-Mutebile told the Financial Times newspaper that he had disagreed with Mr Museveni over the decision to spend $740 million on jet fighters, which has pushed reserves down from six to four months of import cover. “He gave me some promises which he has not kept – like a way to redress the reserves,” Mr Mutebile told the FT. “I am still fighting with him.”
The Ministry of Defence, under President Museveni’s directive, withdrew a reported $400 million (Shs960 billion) from the Central Bank to pay for the fighter jets without parliamentary approval.
On March 24, President Museveni met MPs from his ruling NRM party and asked them to rubberstamp the purchase under a classified vote. The President told the MPs that the jets were necessary for Uganda’s defence now that the country has confirmed oil reserves.

Seeking explanation
The Public Accounts Committee of the Eighth Parliament wrote to the Central Bank governor seeking an explanation over the release of the funds without prior parliamentary approval. It is not clear whether this was provided but it now appears that the money was drawn out of the country’s foreign reserves.
Mr Mutebile rarely makes public statements and his comments suggest how deeply concerned technocrats are about the state of the economy. Although the economy is expected to grow by about six per cent in the 2011/12 financial year, widespread unemployment and the highest inflation rate in 17 years has caused concern and public protests over the rising cost of living. Despite being “very courageous”, Mr Museveni’s continued embrace of “elements of Marxism” was undermining the economy, Mr Mutebile told the FT. He reportedly cited several factors that were causing problems between him and the President, the FT reported, including a planned $2.2b hydropower plant at Karuma, which government says it will build with or without external funding and dodgy tax exemptions to regime cronies.

Others include poor agricultural productivity and the government’s policies, which tend to favour a large population, despite Uganda having one of the youngest populations in the world.
The newspaper also reported that the governor is dismayed by an unexplained collapse in fuel reserves, which has led to volatile and rising prices at the pump, and a lack of progress in modernising agriculture. “Our output is heaven-made, but it should be man-made,” he told the newspaper.

Failed review
The newspaper article also revealed that Mr Mutebile had found it “very, very humiliating” after Uganda failed an International Monetary Fund review earlier this year over the record Shs650 billion supplementary budget, most of which went to election-related expenses.
Mr Thomas Richardson, the IMF resident representative, told the FT: “(Government) passed a supplementary budget which was inconsistent with the programme that we had just agreed, right before the election.”
Mr Mutebile, who has been central bank governor since 2001, is partly credited for the free-market policies that have led to sustained economic growth, and bringing inflation down from triple to single digits.
The FT said the governor, whose five-year contract was renewed in 2006 and late last year, and the President are increasingly at loggerheads as “erratic policy” undermines the fiscal discipline that underlined the country’s economic growth.
However, Mr Mutebile told the newspaper that despite his concerns about the President’s actions, Mr Museveni had shown courage in choosing not to introduce export controls and that there was “no alternative” to Mr Museveni in “this economy”.
Mr Mutebile was unavailable for comment yesterday as was the President’s spokesperson Tamale Mirundi. Donors have also cut or withheld budget support citing, among others, entrenched corruption and fiscal indiscipline.