An ongoing Parliamentary probe into the closure of seven commercial banks in previous years by the Bank of Uganda is raising questions about the state of monetary policy management and the health of Ugandan banks.
The investigation by the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises cast doubt on transactions and conduct in BoU's bank supervision unit.
A case in point was the sale of a combined loan book belonging to the failed banks that was valued at more than Ush300 billion ($79.9 million) but sold at just Ush8 billion ($2 million) to Kirkland and Associates.
Some Ush19 billion ($5 million) remains unaccounted for in BoU's operations records, the committee found.
The affected banks were closed between 1992 and 2016 on grounds of severely diminished capital, excessive non-performing loans, poor management and insufficient liquidity.
These were Teefe Bank, International Credit Bank, Greenland Bank, Co-operative Bank, Global Trust Bank Ltd, National Bank of Commerce and Crane Bank.
The committee's initial hearings have been dominated by intense grilling from legislators over the quality of BoU's handling of bank closures, lukewarm responses provided by current and former central bank executives plus the arrest and prosecution of a security officer and a driver over the illegal transfer of some sensitive documents from BoU to a mysterious location on a weekend.
Now questions are being asked about the extent of the BoU's management problems and their impact on core functions such as monetary policy.
This refers to the monitoring of cash in circulation, interest rates, exchange rates and controlling inflation through use of policy instruments like the Central Bank Rate.
Faced with a secretive but powerful institution, queries about transparency and fairness in decision making have gained prominence during the hearings.
Who actually controls monetary policy in Uganda? Who evaluates past monetary policy decisions? Does BoU's monetary policy accommodate taxpayer expectations? Why is the central bank reluctant to publish the minutes of Monetary Policy Committee meetings?
Whereas the BoU kept the Central Bank Rate unchanged at 10 per cent for December last week -- a move that pleased some analysts, the bank's officials and financial traders sound defensive over queries raised on the quality of Uganda's monetary policy.
"Our monetary policy is solid. If you look back at two years ago, inflation and interest rates seemed to be heading upwards but we contained them.
"I think monetary policy should be judged on output and not what is happening in a House committee," said Dr Adam Mugume, the BoU's executive director for research.
"The BoU has some of the best experts on monetary policy and is still ranked as one of the best central banks in the region.
"There may be credibility issues raised by the probe but the monetary policy and banking supervision units have been separate for a long time and this means less risks of contamination related to bad technical habits," said Benoni Okwenje, a fixed income trader at Stanbic Holdings Ltd.