Bank of Uganda has been tasked by MPs to explain why external lawyers were paid in foreign currency despite filing their invoices in Uganda shillings.
The lawyers from MMAKS Advocates were paid $230,000, which translated into Shs 759 million at the 2017 exchange rate, for services relating to the transactions by the central bank in the closure and sale of Crane bank to dfcu bank. The law firm is run by city lawyers; Apollo Makubuya, Timothy Kanyerezi Masembe, Moses Adriko, Mathias Ssekatawa, Ernest Ssembatya and Isaac Walukagga.
Part of the money, amounting to $93,872 (about Shs 346m), was the bill computed on services offered on an hourly basis. According to one of the legal firm's partners, Timothy Masembe Kanyerezi, the bill was based on a blended partner/associate rate of $217 (about Shs 800,000) per hour.
The rest of the bill, totalling $136,128 (Shs 500m) was payment for drawing and negotiating the terms of the purchase of assets and assumptions of liabilities agreement. It was based on the Shs 200 billion cash consideration for Crane bank assessed at a discounted rate of 0.24 per cent.
Yesterday, the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase) probing into the irregular sale of commercial banks tasked the central bank team led by governor Emmanuel Tumusiime-Mutebile to explain why the payment was made in a foreign currency. The legislators accused Bank of Uganda of showing no confidence in Uganda's currency on top of advancing payments without evidence for work done.
Aruu North MP Odonga Otto tasked deputy governor Louis Kasekende who approved the money for Crane bank liquidity support to provide the legal instrument he used to authorize the payments. He also demanded for minutes of the meeting justifying the amount paid out.
Mbarara Municipality MP Michael Tusiime said that the payment was in contravention of a guideline by the permanent secretary and secretary to treasury (PSST) Keith Muhakanizi; warning all accounting officers against paying contractors in foreign currencies, save for contracts that were running before the time of the directive issued in 2016.
"I see this interventional cost of $1.6m paid part of it to local suppliers including MMAKS in dollars against the authority of PSST in reference to Section 79 of the Public Finance and Management Act of 2015. For me, these approvals before we go to the amounts, am still interested in the authority of approvals especially those approvals in foreign currencies." said Tusiime.
Tusiime insisted that Kasekende explains why local contractors were paid in foreign currency despite a ban from the Treasury. Kasekende denied approving the payment in dollars but added that the cited letter by Muhakanizi was addressed to accounting officers in local governments.
"This is a very specific issue, I don’t think I'm even the one who approved it. Let the officials explain that process and the approval process for that amount." said Kasekende.
Cosase vice chairperson Anita Among and Abraham Byandala, one of the committee members questioned whether the central bank makes its budgets in local currencies or foreign currency, to which Kasekende said that their budget is drafted in the local currency.
"I was even yesterday wondering why Bank of Uganda pays in dollars. Are you doing this because you anticipate economic dislocation or what? Do you prefer paying in dollars even where it is not necessary because you anticipate economic discretion? Because in the case of these lawyers surely where will the economic dislocation come into." said Byandala.
Yusufu Mukiibi, the BoU acting chief accountant said that the money paid out to the lawyers in US dollars was a commission to lawyers who recovered money from Crane bank shareholders from the foreign reserves. He said that their office acts on approved instructions from management.
The Committee directed the Bank of Uganda to provide a written response to the issue.