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'Development banks should not be political'.

Kampala.

Uganda has been warned against letting political interference take shape in the operations of the development bank. The warning came from Mr Donald Kaberuka, former executive director of the African Development Bank (ADB) last week in Kampala at a panel debate hosted by Bank of Uganda (BoU) to mark 50 years of existence.

Mr Kaberuka noted that the African continent had, in the past, suffered the consequences of having poorly run development banks.

"We do not need the kind of development banks we had in the 1960s and 1970s. These banks caused us (African governments) fiscal problems. We need a new breed of development banks that are operated on better principles," he said.

Uganda Development Bank (UDB) is the only fully owned government development bank in the country. It experienced governance challenges until it was fully restructured in 2013. The restructuring came with the hiring of expertise from the private sector.

Mode of operationMr Kaberuka noted that development banks should be operated using a private sector model.

"Development banks should not be political banks but should instead respond to market failures operated on private sector principles," he added.Uganda has had its fair share of failed banks with Uganda Commercial Bank (UCB) in particular, until it was acquired by Standard Bank in 2001. In some instances, UCB was accused of being a political bank with weak corporate governance synonymous with public companies at the time.The theme of the public debate was: "The role of the Central Bank in a Market-Oriented Economy."

Mr Kaberuka noted that Africa had lost an opportunity because it was a "victim of ideologies" it did not understand. "We are now wiser," he added.Mr Adam B. Elhiraika, director, macroeconomic policy division office at the United Nations Economic Commission for Africa, said: "We missed a lot of opportunities over the last four decades because we imported economic models."

"As you are aware, no two economies are identical. This means the set of institutions and policies vary from one country to another and there is no consensus even amongst the academia and policy practitioners," Dr Louis Kasekende, deputy governor BoU, said.

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Publication:Daily Monitor, Uganda (Kampala, Uganda)
Geographic Code:6UGAN
Date:Jul 20, 2016
Words:411
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