Reports on Observance of Standards and Codes

Uganda and the IMF

What do you think of Reports on the Observance of Standards and Codes?


August 1999

Prepared by an IMF Staff Team from the African, Fiscal Affairs, Monetary and Exchange Affairs, Policy Development and Review, and Statistics Departments, on the basis of information provided by the Ugandan Authorities


List of Acronyms


  1. Overview

  2. Data Dissemination
    1. Description of Practice
    2. Summary of Uganda's Practices
    3. IMF Staff Commentary

  3. Fiscal Transparency Assessment
    1. Description of Practice
    2. IMF Staff Commentary

  4. Transparency of Monetary Policies
    1. Description of Practice
    2. IMF Staff Commentary

  5. Banking Supervision Assesses only the authorities' observance of the transparency elements of the Basel Core Principles
    1. Description of Practice
    2. IMF Staff Commentary

  6. Securities Market This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a Report on Observance of Standards and Codes (ROSC).

  7. Insurance Market This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a Report on Observance of Standards and Codes (ROSC).


  1. Data Categories and Indicators
  2. Major Transparency Elements of Monetary and Financial Policies
  3. Transparency in Monetary Policy and Financial Sector Regulation: Major Statutes, Agencies, Regulations, and Sources of Public Information

List of Acronyms

ASEA African Stock Exchanges Association
ASYCUDA     Automated System of Customs Data
BOU Bank of Uganda
BPM4 Balance of Payments Manual (fourth edition)
BPM5 Balance of Payments Manual (fifth edition)
CMA Capital Markets Authority
CEO Chief Executive Officer
DVP Delivery Versus Payment
EASRA East African States Securities Regulatory Authorities
FIS Financial Institutions Statute
FSA Financial Services Authority
GDDS General Data Dissemination System
GDP Gross Domestic Product
GFS Government Finance Statistics
IAIS International Association of Insurance Supervisors
ICPAU Institute of Certified Public Accountants of Uganda
IOSCO International Organization of Securities Commissions
MFPED Ministry of Finance, Planning and Economic Development
NPSC National Payments Systems Council
RTGS Real-Time Gross Settlement
SEC Securities Exchange Commission
SDDS Special Data Dissemination Standard
SNA System of National Accounts
UAS Uganda Accounting Standard
UBOS Uganda Bureau of Statistics
URA Uganda Revenue Authority
USE Uganda Securities Exchange


This report is one in a series of experimental studies aimed at considering how to present information on an economy's transparency practices and some of the standards that lie behind these practices.

The report has been prepared by IMF staff with the cooperation of the Ugandan authorities. Staff discussed aspects of transparency and the evolution of the government's institutional policy management framework with the authorities in May-June 1999. The authorities responded to staff requests for information contained in a series of questionnaires, and also provided comments on an earlier draft of this report.

The objectives of a report on transparency practices are twofold. It can assist authorities in identifying areas where transparency can be enhanced further, with benefits for the accountability of policy makers and for economic performance. Second, by providing information on the extent to which countries observe internationally recognized standards deemed important for the effective functioning of financial systems, a report on transparency practices and other associated standards can contribute to well-founded lending and investment decisions.

It is important to recognize the limitations of this experimental report. It does not attempt to provide an in-depth assessment of the quality of the published information. Rather, it considers transparency practices, focusing on whether the disclosure elements of international standards--requirements to make information available to the public--have been satisfied and also goes some way in considering whether the basis on which the information is reported to be compiled is consistent with the definitional or framework elements of the relevant standards.

I.  Overview

1.  Since emerging from civil war in 1987, the Ugandan authorities have been successfully implementing an ambitious program of macroeconomic adjustment and structural reforms with extensive financial and technical assistance from the international donor community. The government has substantially reduced its involvement in the commercial sector. Fundamental and far-reaching reforms have been implemented in the areas of tax policy and administration, public expenditure and services, monetary policy and operations, commercial banking, foreign trade and exchange systems (including complete liberalization of external capital transactions), and privatization. State-owned commodity marketing boards and official price controls have been eliminated, as have all interest rate controls, commercial bank credit ceilings, and administrative credit allocations. Although Uganda still faces substantial challenges, the results achieved thus far have been encouraging: real economic growth has been strong, inflation has remained low for half a decade, and the incidence of poverty has been substantially reduced.

2.  The government's economic reform program has been supported by substantial legislative reform, which has strengthened and enhanced the efficiency of fiscal and monetary policy and improved the compilation and dissemination of statistical information. The Bank of Uganda (BOU) Statute, 1993, vested the central bank with the responsibility of maintaining low inflation and clearly sets limits on the extent to which it can finance fiscal operations. The Financial Institutions Statute, 1993 (FIS), established clearly the responsibility of the BOU to set and enforce prudential regulations for commercial banks, and the new Constitution underscores the independence of the Governor of the BOU. The FIS is being strengthened. The tax system has been simplified and streamlined with the introduction of a value-added tax and a model income tax law. These legislative reforms have enabled the BOU to implement a system of indirect monetary control, and have enabled the government to progressively to improve the efficiency and transparency of the tax system. The government clearly sets forth its policy objectives and proposed public expenditure program in the budget address to parliament each year. In addition, the vibrant free press and the increasingly vocal elected parliament have increased the level of transparency and debate of government policies.

3.  In this report, the staff has assessed the authorities' practices against a set of internationally accepted standards. In the areas of data dissemination, fiscal transparency, and banking supervision, Ugandan practices have been assessed primarily against the Fund's General Data Dissemination Standard (GDDS), its Code of Good Practices on Fiscal Transparency, and the transparency aspects of the Basle Committee's Core Principles for Effective Banking Supervision, respectively.1 The report also considers the transparency practices in the area of monetary and financial policies, using the broad principles underlying the Code of Good Practices on Transparency in Monetary and Financial Policies. In addition, the report provides a summary of the authorities' views on the extent to which domestic practices are consistent with international standards in the areas of securities market regulation, insurance regulation, and accounting and auditing, and describes how domestic standards are promulgated and enforced. It also describes practices in the payments system. The IMF staff made no attempt to provide its own view of observance of standards in these latter areas.

4.  It is the staff's view that Uganda has made notable improvements in enhancing transparency practices in key areas, especially fiscal and monetary policy and banking supervision. While progress has been less pronounced in the area of data dissemination, the government has taken important steps to improve practices in this regard. Key areas where further improvements in transparency and observance of international standards could be made are the following:

  • Full implementation of the Uganda Bureau of Statistics (UBOS) Act, along with the government's proposed increase in budgetary provisions for the UBOS, will be necessary to help improve the dissemination of data in accordance with the GDDS. These steps would improve the coordination and reconciliation of data compiled by the Ministry of Finance, Planning and Economic Development, the BOU, and other agencies, and enable the UBOS to improve the quality, coverage, and timeliness of its surveys, particularly in the area of national accounts.

  • The off-budget quasi-fiscal operations executed by public enterprises, state-owned financial institutions, and extrabudgetary funds, as well as the firm-specific tax exemptions, inhibit transparency in fiscal operations. Greater transparency in this area will improve as the government's privatization program proceeds and its involvement in the financial and nonfinancial enterprises and the private sector is reduced. Transparency would be further improved by rigorously enforcing the provisions of the tax laws and reducing the use of discretionary exemptions.

  • As decentralization proceeds and a greater portion of central government expenditures take the form of unconditional grants to district governments, improvements in the preparation and reporting of district government budgets will be needed in order to provide the basis for transparent consolidated government budget accounts. In this regard, it would be important to fully adopt government finance statistics (GFS) reporting standards at all levels of government.

  • Improvements in expenditure commitment, planning, and control will help avoid the accumulation of domestic arrears and bring greater transparency to public expenditures.

  • With regard to the banking sector, a more rigorous adherence to, and enforcement of, the existing legal framework would improve the soundness of Uganda's banking sector and the integrity of the supervisory process. The proposed amendments to the Financial Institutions Statute will help greatly to improve the transparency of the process by increasing the independence of the Bank of Uganda, incorporating mandatory corrective action in cases of capital inadequacy, and providing clarity in the definitions of exposure limits.

II.  Data Dissemination

A.  Description of Practice

5.  The standard. The principal standard against which to assess the transparency of Uganda's macroeconomic and sociodemographic data is the IMF's General Data Dissemination System (GDDS), which was established in December 1997. The primary focus of the GDDS is on encouraging members to improve data quality; providing a framework for evaluating the need for data improvements and prioritizing such improvements; and providing guidance on data dissemination.2 The focus on data quality recognizes the fact that, for many countries, improvements in data quality are a necessary precursor to an enhanced dissemination of data to the public. The features of the GDDS take account of the considerable time needed to make substantial improvements in data compilation and dissemination practices.

6.  The GDDS, like the IMF's Special Data Dissemination Standard (SDDS), places emphasis on following sound practices in four dimensions:

  • coverage, periodicity, and timeliness of the data;

  • quality of the disseminated data;

  • integrity of the disseminated data; and

  • access by the public to the data.

However, the GDDS is broader in scope than the SDDS in that, besides the real, fiscal, financial, and external sector data, it includes socioeconomic data. The GDDS focuses primarily on a set of core statistical frameworks and indicators, supplemented by data systems and categories that provide clear links between the GDDS and the SDDS for member countries that wish to use participation in the GDDS as a step toward subscription to the SDDS. Participation in the GDDS is voluntary. It requires a commitment to using the GDDS as a framework for statistical development; designation of a country coordinator; and preparation of "metadata" (i.e., information about the availability of data) for posting by the IMF on the Internet.

7.  With its participation in the GDDS, Uganda has agreed to be a pilot country for the preparation of complete sets of metadata and has designated a country coordinator to work with IMF staff on this and related exercises.

8.  Institutional framework. The UBOS is Uganda's official statistical agency and is the principal data-collecting and disseminating agency responsible for coordinating, monitoring, and supervising the national statistical system. The UBOS operates under The Uganda Bureau of Statistics Act, enacted in 1998. Under the provisions of this act, the UBOS "collects, compiles, analyzes, and publishes social, environmental, economic and national accounts statistics." The act makes the UBOS responsible for promoting cooperation, coordination, and rationalization among users and providers of statistics at the national and local levels, so as to avoid duplication of effort and ensure optimal utilization of scarce resources. The act also makes it the duty of all lead agencies to cooperate with the UBOS in carrying out its functions. Moreover, all initiatives by agencies other than the UBOS to conduct censuses and surveys at the national level are required to be presented to the UBOS for consideration and approval.

9.  The act provides legal authority for the UBOS to be supplied with such information as may be prescribed, including powers of entry and inspection, as well as penalties (fines and/or jail terms) for noncompliance with requests for data. The act subjects the UBOS to provisions relating to the confidentiality of the information supplied to it. Penalties that include fines and/or jail sentences upon conviction are prescribed for misuse of information by any person employed in the execution of any duty under the act. The act requires the UBOS to release for general dissemination the statistical data that have been collected, after ascertaining their accuracy.

10.  The Ministry of Finance, Planning and Economic Development (MFPED) compiles and publishes data on central government budgetary aggregates and on central government debt. Annual data on the provisional outturn of budgetary revenues and expenditures for the previous fiscal year and on the final outturn for the previous year are published in the Draft Estimates of Revenue and Expenditure (Recurrent and Development) and in the Background to the Budget. These data are then used by the UBOS and the Bank of Uganda (BOU) as the source material for the presentation of the fiscal accounts in their publications and are compiled generally according to GFS standards. There is no statutory requirement for the MFPED to publish data on either central government budgetary operations or debt. However, the accounts are required to be audited on an annual basis by the Auditor General and thereafter submitted to the legislature.

11.  BOU compiles and publishes data on the financial and external sectors, and is governed by the Bank of Uganda Statute of 1993. The statute requires that every financial institution furnish to the BOU information that may be required for the proper discharge of the functions of the BOU. It also prohibits the BOU from publishing or disclosing any information regarding the affairs of a financial institution or of a customer of a financial institution without its consent. There is no legal requirement for the BOU to publish data.

B.  Summary of Uganda's Practices3

12.  The production and dissemination practices for macroeconomic data in Uganda are summarized in Table 1.

13.  Real sector. GDP using the production approach is compiled both in nominal and real terms based on the concepts of the 1968 System of National Accounts (SNA). Efforts have begun to implement the principles of the 1993 SNA, as well as improve source data. Discrepancies between estimates of GDP based on production and those based on expenditure are large. Lack of supporting accounts, such as use-of-income accounts, makes reconciliations difficult. Periodicity and timeliness conform to the GDDS. The index of industrial production (1987=100) has a coverage of about 70 percent of total industrial activity. Although its periodicity conforms to the GDDS, dissemination is currently delayed owing to resource constraints. The consumer price index covers all socioeconomic groups in five urban centers. The current weights are based on the 1989/90 Household Budget Survey.

14.  Fiscal sector. Central government budget reporting includes details of revenues, expenditure, balance, and financing, and interest payments are identified separately. A breakdown of financing between domestic (banks and nonbanks separately) and foreign is available. Fiscal data exclude extrabudgetary funds. However, such funds are self-financing, and monthly and/or quarterly financial reports are compiled. Comprehensive information on the revenues collected by spending ministries (appropriations in aid) and the expenditures financed through these revenues is not available.

15.  For the fiscal sector, the primary data source is the Ministry of Finance's published accounts. The BOU and the UBOS generally adopt internationally comparable methodologies in compiling statistics based on these publications, however, as these statistics are not based on original ledgers, gaps remain in the classifications.

16.  Data on domestic public debt by holder and instrument are published monthly. Data on public external debt cover multilateral creditors, OECD and non-OECD bilateral creditors, commercial nonbanks, and loans to the private sector with government guarantees. The periodicity of their production is in accord with the GDDS.

17.  Financial sector. In the financial sector, the institutional coverage of the net external position, domestic credit, broad money, and base money is consistent with the recommendations of the GDDS, as is the periodicity of the production of the data. Interest rate data conform to the GDDS with respect to coverage and periodicity. Moreover, data on commercial banks' time and savings deposit rates and on maximum lending rates by economic sector activity--items that the GDDS encourages countries to disseminate--are also compiled with a monthly periodicity and published with a lag of four to six weeks.

18.  External sector. Dissemination of data on the external sector generally meets the recommendations of the GDDS with respect to periodicity, but not timeliness. However, exports are likely understated and imports overstated owing to faulty classification of transactions.

19.  The compilation of the balance of payments follows the fourth edition of the Balance of Payments Manual (BPM4). The sources used are in some instances outdated, and new sources of data, such as surveys, are needed to improve compilation practices. Currently, however, the lack of detail on components hampers reconciliations with related data and statistical cross-checking.

20.  A substantial challenge to the authorities' efforts to improve data quality lies in the balance of payments, where the value of the source data, namely, banks' returns on foreign exchange transactions, has shrunk with the liberalization of financial policies. Thus, a greater emphasis is being placed on surveys. The authorities have set a target date of December 1999 to start compiling and publishing balance of payments statistics consistent with the fifth edition of the Balance of Payments Manual (BPM5). Over the medium term, the adoption of an enhanced preshipment inspection system and the Automated System for Customs Data (ASYCUDA), inter alia, to strengthen the performance of the customs department can be expected to improve data on imports. However, the smuggling of goods through Uganda's porous borders cannot be completely eliminated. Finally, a new reporting system for commercial banks that is better equipped to meet statistical requirements is nearly developed.

21.  Sociodemographic data. Sociodemographic data are derived from the 1991 Population and Housing Census and from the National Household Survey series, the most recent one being for 1995/96. The publication of these reports, in several volumes, have enabled the production of data for population, and of some basic indicators for health, education, and poverty.

C.  IMF Staff Commentary

22.  The recent enactment of the Uganda Bureau of Statistics Act (1998) provides Uganda with the legal basis for establishing a comprehensive and transparent data dissemination system. However, statistical development in Uganda has been hampered by severe shortages of trained staff, data processing equipment, and software, and by inadequate budgetary allocations. In order to improve the compilation of national accounts, prices, and balance of payments data, several outdated surveys should be replaced or surveys commenced where none exist at present. The informal economy is inadequately covered, and manufacturing and possibly construction are underestimated. Also, the value added by the providers of financial and business services is not explicitly measured. With respect to monetary statistics, practices adopted by commercial banks in respect of the classification of deposits by residency vary widely. Moreover, primarily because of the asymmetrical treatment of development fund accounts in the central bank's and commercial banks' statistics, there exists a large discrepancy between what the BOU indicates as claims on commercial banks and what the commercial banks report as their liabilities to the BOU. Intensified efforts at interagency coordination can reduce duplication and waste, and under the impetus of recent technical assistance, some initiatives are under way.

23.  The authorities are mindful of the urgency and importance of the issue. Beginning in 1999/2000, they have committed to increasing the budgetary allocations for the UBOS by more than 100 percent in nominal terms. However, given the agenda ahead and the typically long duration that some initiatives require for the efforts to bear fruit, allocations for running costs should continue at these higher levels thereafter. Donor assistance, especially in the area of computer and related equipment, would be a very useful supplement to the efforts of the authorities. It is expected that such efforts will be more fully articulated as Uganda progresses in meeting the challenges of participation in the GDDS.

24.  Principles and practices with respect to data integrity and access to the data by the public are relatively new in Uganda and are, therefore, not yet fully integrated into data production and dissemination practices. Now that Uganda has agreed to be a case study for the GDDS, these practices should be documented and reviewed, or, where they do not exist, articulated over time. Importantly, the Uganda Bureau of Statistics Act provides for maintaining the confidentiality of information provided to the UBOS, including severe penalties for disclosure in a manner that violates this important provision. It is now necessary to build upon this step, especially by clarifying the process involved in disseminating data to the public. To improve the integrity of the data, the current practice of granting the government access to data before its general release to the public should be terminated. Resolving this potential problem should be a priority for Uganda as it moves to improve its statistics.

III.  Fiscal Transparency Assessment

25.  This section provides an assessment of fiscal management practices in Uganda against the requirements of the IMF Code of Good Practices on Fiscal Transparency--Declaration of Principles, based on the authorities' completion of a fiscal transparency questionnaire prepared by the IMF staff.4 The assessment has two parts. The first part is a description of practices, prepared by the IMF staff on the basis of the questionnaire response. The second part is an IMF staff commentary on fiscal transparency in Uganda.

A.  Description of Practice5

26.  Clarity of roles and responsibilities. In broad terms, the general government is distinguished from the rest of the economy. However, as the central government is in the process of divesting public enterprises (including financial enterprises), it is still engaged in quasi-fiscal activities. The own revenues of line ministries (appropriations in aid) and the expenditures financed with these funds are neither compiled nor under the control of the treasury. There are also some extrabudgetary funds, the most important of which are associated with the privatization program and the collection of nonperforming assets transferred from the state-owned bank; these funds operate independently from the treasury. While the legal framework for budgeting covers most aspects of fiscal management, district and local government budget processes are still evolving. The central bank has no fiscal policy role, and its financing of the deficit is strictly limited. Tax laws are generally clear, but there is considerable scope for the granting of discretionary exemptions by the government. A code of Ethics for public servants is in place, but much work remains to be done to ensure its observance.

27.  Public availability of information. The budget provides a comprehensive coverage of central government budget accounts, but data for district budgetary operations are not easily available and the general government position is not compiled. Public enterprises are required to submit audited accounts to the government annually within six months of the end of the financial year, but there are usually substantial delays and these accounts are not regularly published. The financial operations of the principal extrabudgetary funds are compiled and reported monthly and/or quarterly, and are presented to parliament. Although information on fiscal operations for preceding years is not included in the central government budget document, historical information on budget and outturn information for the preceding four years is provided by sector and vote in the Background to the Budget presented with the budget each year. No statements on contingent liabilities, tax expenditures, or quasi-fiscal activities are provided with the budget. Details of government debt are reported in the Background to the Budget and in the report of the Auditor General. Limited information is provided on government financial assets. The constitution requires annual publication of the budget estimates at a prescribed time and of audit reports, but, beyond these commitments, there is no formal advance release calendar.

28.  Open budget preparation, execution, and reporting. From 1998/99 (July-June), the Draft Estimates of Revenue and Expenditure (Recurrent and Development) and Background to the Budget present a medium-term budget framework, covering the budget year plus two forward years. Explicit targets for a variety of budget aggregates are set in annual policy statements as a share of GDP. These targets are monitored ex post annually through the financial statements. Fiscal policy is set in the context of a medium-term budget framework, but no long-term scenarios are prepared. Moreover, there are no formal fiscal rules guiding the formulation of fiscal policy. Technical capacity for macroeconomic forecasting is being built up with external technical assistance. Existing policy commitments and new policy proposals are not systematically distinguished in the budget process, although costs of major new projects are clearly identified. In addition, the budget classification is not completely consistent with international government finance statistics (GFS) standards for fiscal reporting. Statements of objectives are provided for programs, and it is planned to move toward output-oriented budgeting. Accounting is done predominantly on a cash release or check issuance basis, but no statement of accounting policies is included in either budget or audit reports. Accounts are maintained manually by most ministries, and problems are being experienced both in terms of timeliness of reports and implementation of internal control procedures. Audited final accounts are now presented within 12 months of year's end; prior to 1997/98, however, long delays had been experienced. Moreover, reconciliation of accounts is satisfactory at year's end but problematic during the year. Weaknesses in expenditure commitment control and payroll management have led to the accumulation of domestic arrears. To address this problem, a Commitment Planning and Control System is being implemented for all ministries, and the recently implemented ministerial public service reform program is being extended to the nonministerial civil service. Also, regulations for procurement and tendering are being revised. Finally, some limited sector reviews of performance against objectives are carried out.

29.  Independent assurances of integrity. The constitution requires that the Auditor General submit an annual report to parliament on the government accounts. It requires high professional qualifications for appointees to the post of Auditor General and independence from direction and control from any person or authority. Separate legislation for the Auditor General and the annual audit is being drafted. Reports by the Auditor General are discussed by the Public Accounts Committee of parliament, and findings are covered freely by the press. Technical capacity for the audit at present is limited, but budget support has been increased recently and external technical assistance is being provided. Macroeconomic forecasting, as noted, is being improved, and information on assumptions is open to outside scrutiny. More resources are being devoted to improving the capacity of the UBOS.

B.  IMF Staff Commentary

30.  The authorities have provided a clear and frank assessment of fiscal transparency that indicates that, while progress is being made in a number of areas, considerable further improvement is required. The authorities are to be commended for recently improving the timeliness of audit reports and implementing commitment accounting to strengthen expenditure planning and internal controls. The introduction of a medium-term budget framework is also a major step forward. Some other improvements, however, are vital to achieve the level of fiscal transparency specified in the Code of Good Practices on Fiscal Transparency. Before making more specific recommendations, two general considerations are important:

  • The lack of clarity in defining the government's role vis--vis the rest of the economy underlies many of the remaining transparency issues. This situation will improve as the government completes its privatization program, thereby eliminating the source of substantial quasi-fiscal activities. It is important, however, that the privatization program be fully transparent, that the government's relationship with the newly privatized entities be clear, and that the general regulatory framework for the private sector be open and nondiscriminatory.

  • The rule of law and regulations should be enforced. Current budget regulations include enough safeguards for monitoring expenditures and controlling arrears. However, these are not fully enforced, and new legislation and mechanisms are being designed. Likewise, in the area of tax administration, the current legislation on penalties for late filing and payments are not regularly enforced. Reforms to enhance transparency in government operations will be less effective unless they are accompanied by a strong political commitment to enforce the new budget regulations and laws.

31.  Clarity of roles and responsibilities. Coverage of the budget needs to be improved if the budget is to serve its purpose as the central instrument of fiscal policy. The advantages of medium-term perspectives and effective auditing can be nullified if there are many quasi-fiscal mechanisms through which such controls can be evaded. All extrabudgetary funds and public enterprise financial operations should be reported at the same time as the annual budget and should be subject to the same accounting and auditing controls.

32.  The legal basis for taxes is undermined by the practice of the executive branch of granting exemptions to protect or to foster specific commercial activities and, more generally, to influence resource allocation. A strong political statement that this practice would be discontinued would enhance the transparency of tax policy and establish a level playing field for taxpayers.

33.  By law, the central government has little control on local governments' budgetary policies and balances. Until now, this situation has not endangered macroeconomic stability; however, it is unclear what impact the recent devolution of expenditure responsibilities has had on expenditure efficiency and effectiveness. The current efforts to integrate local governments into a fiscal management system could be accelerated.

34.  The fiscal management capability of the MFPED should be strengthened, including through its internal reorganization. At the same time, in order to reduce uncertainty among taxpayers with regard to administrative regulations, the MFPED's official and informal role in tax administration should be returned to the domain of the Uganda Revenue Authority (URA).

35.  The government is adopting new administrative accountability regulations, with a view to enhancing expenditure control. It is essential that these regulations be well publicized, and readily and uniformly enforced.

36.  At the same time, a special effort is required by the URA to follow a transparent and even approach in enforcing tax laws and regulations. Although taxpayer rights and obligations may be clear to the tax administrators, there is anecdotal evidence that these rights are not uniformly respected.

37.  Public availability of information. Action should be taken as soon as possible to include statements on the use and estimates of the cost of, government guarantees, tax expenditures and exemptions, and quasi-fiscal activities in the Background to the Budget.

38.  Open budget preparation, execution, and reporting. A necessary condition for the successful implementation of the planned upgrade of the system for executing, monitoring, and controlling of approved expenditure is to make realistic estimates of revenue and include correspondingly realistic expenditure estimates in the budget document.

  • With a view to enhancing policy analysis, the MFPED should distinguish, both in budget preparation and presentation, between existing and new commitments.

  • The budget document should include an assessment of fiscal risks (both on the revenue and expenditure side). This assessment may allow the executive branch to preempt requests for additional budget appropriations.

  • To facilitate policy analysis, a determined effort should be made to compile GFS consistent economic and functional breakdown of government spending. In-year fiscal reports should be compiled in this format.

  • In order to promote accountability at the local level, the recent devolution of expenditure responsibilities--which are financed by central government transfers--should be accompanied by a strengthening of the monitoring of how funds are spent locally.

  • The usefulness of audit reports is severely limited because they are not reconciled with budget appropriations and bank accounts.

39.  Independent assurances of integrity. Continued efforts should be made to build up technical capacity in the area of audit and statistics, and the effectiveness of these units should be regularly monitored and assessed.

IV.  Transparency of Monetary Policies6

A.  Description of Practice

40.  The following considers the transparency practices of Uganda's monetary and financial policy frameworks. They relate to the Fund's draft Code of Good Practices on Transparency in Monetary and Financial Policies.7 The final section describes transparency practices relating specifically to the regulation of insurance and securities, payment systems, auditing and accounting.

41.  Enhancements to the legal framework and transparency and public disclosure practices in monetary policy and financial regulation have begun receiving attention, only very recently, as part of the ongoing economic and financial sector reform in Uganda. The appropriate design and implementation of monetary policy has been constrained by weaknesses in the banking sector, underdeveloped and illiquid financial markets and the recapitalization of the Bank of Uganda (BOU). The practical working of the monetary policy, the overall economic policy environment and financial sector fragility have thus conditioned monetary policy and the extent of transparency and public disclosure.

42.  Clarity of roles, responsibilities, and objectives. The role of the Bank of Uganda (BOU) in relation to the macroeconomic and financial system management is specified in the Bank of Uganda statute, 1993 (statute) and the Financial Institutions statute, 1993 (FIS). The Constitution of the Republic of Uganda, 1995 (Constitution) also assigns the BOU the role of issuing legal tender and promoting the stability of the currency. The statute states the ultimate objective of monetary policy is achieving and maintaining economic stability. Section 5.2 of the statute requires the BOU to (i) maintain monetary stability, and (ii) manage foreign exchange reserves. While the concept of monetary stability has not been defined and nor has a primary objective been clearly defined, the operational interpretation of the first statutory requirement is to assist in maintaining a stable price level. The statute requires the BOU to formulate such monetary policy and advise the government accordingly. In the event of divergence of views between the government and the BOU, the Minister of Finance and Economic Planning (Minister) may, with the approval of the cabinet, and by a directive in writing, determine the specific policy to be adopted by the BOU and submit the directive to parliament within a specified time frame.

43.  The Minister, through the annual budget speech, announces the monetary program and the associated macroeconomic objectives. The BOU's monetary operations are undertaken within the announced framework. The statute assigns to the BOU Board the primary responsibility for carrying out monetary policy. The BOU coordinates with the Ministry of Finance on matters relating to the implementation of monetary policy through weekly and monthly technical meetings.

44.  The BOU Board is empowered by statute to prescribe the framework for determining the external value of the Uganda shilling in consultation with the Minister. In practice, the BOU has the institutional responsibility for carrying out oversight for the interbank foreign exchange market, which is governed by the "Foreign Exchange Guidelines to Banks and Foreign Exchange Bureaus," issued by the BOU (July 1990 and November 1993), a code of conduct on the foreign exchange transactions, and prudential regulations issued by the BOU. The BOU's stated exchange rate policy is announced as part of the annual monetary program in the budget speech. In the foreign exchange market, the BOU limits its intervention to meeting the foreign reserve objectives and smoothing temporary fluctuations in the market.

45.  The specific functions of the BOU in relation to credit to the government are prescribed in the statute, which also authorizes the BOU to act as the banker to the government and act as its agent in financial matters. The specific terms and conditions governing the banking relationship between the BOU and government have not yet been defined, but the adoption of a memorandum of understanding between the government and the BOU is under consideration. The statute authorizes the BOU to make temporary advances to the government with respect to deficiencies of recurrent revenue. With advances made not to exceed 18 percent of the budgeted recurrent revenue, at the beginning of each financial year, the treasury identifies and submits to BOU its requirements for temporary advances, and the BOU is authorized to operate within that requirement. The Minister in his annual budget statement announces what balances he intends to maintain with the banking system, and with the BOU in particular.

46.  The BOU is authorized to invest and discount government securities, and guidelines have been issued in relation to the purchase and rediscounting of treasury bills and central bank bills. While the BOU is empowered by Section 30(1)(b) to buy and sell government securities, the rules and procedures relating to BOU's participation in the government securities market require codifying and explaining to the market participants.

47.  Process for formulating and reporting decisions. The BOU uses a monetary targeting regime, under which it monitors developments in base money and weekly indicators of inflation and treasury bill rates, and adjusts the desired levels through the issuance of securities. Through a Quarterly Economic Report, the BOU indicates its assessment of the trends and the achievement of its monetary policy actions during the quarter under review. The report reviews the conduct of monetary policy and provides details of the BOU's domestic operations. In the recent period, the BOU and the government have been making public statements explaining the exchange market interventions undertaken by the BOU and the monetary policy considerations that dictate the BOU operations.

48.  Public availability of information. The BOU publishes monetary and banking data in the monthly and quarterly bulletins and in the annual report. The coverage broadly conforms to the IMF's data dissemination standards, but the frequency and timeliness are not consistent with the GDSS in practice. The statute prescribes that the BOU shall prepare a quarterly statement of its assets and liabilities, to be published in the Uganda Gazette and with a copy submitted to the Minister. In practice, the publication is irregular. The BOU also prepares a monthly balance sheet but does not publish it. Emergency financial support to commercial banks by the BOU, if any, is indirectly captured through a line on aggregated commercial bank borrowing from the central bank published in the Quarterly Economic Report (monetary survey) and the different types of BOU support cannot be readily ascertained. Information on foreign exchange liabilities and commitments is disclosed in the Key Economic Indicators, the Quarterly Economic Report and the Annual Report. The BOU also sends monthly information on foreign exchange operations and commitments to the IMF for publication in International Financial Statistics (IFS).

49.  The BOU does not yet have a system to announce publicly its regulations at the time of issue and does not serialize them in the Quarterly Economic Report or the annual reports. Copies of the regulations are also not easily accessible. The BOU is planning to introduce a home page on the Internet.

50.  Mechanisms of accountability and assurances of integrity. The accountability mechanism for the BOU consists mainly of two components. First, the BOU is required under Sections 44 and 45 of the statute to have its accounts audited at least once every year by the Auditor General or an auditor appointed by him to work on his behalf. All expenditures in the Bank are pre-audited by the Internal Audit Department. The accounting and disclosure requirements of the BOU accounts are prescribed by the Auditor General as provided for in the Constitution. The accounts are submitted to parliament and debated within six months before the report is considered final. From 1997/98 henceforth, the audit of the BOU balance sheet will be audited under the new International Accounting Standards recently adopted by the Institute of Certified Public Accountants of Uganda (ICPAU). Second, under Section 50 of the statute, the BOU is required to (i) publish its annual report no later than three months after the end of each financial year; and (ii) present to the Minister a report of its activities and operations with regard to the BOU's procedures and policies, along with a copy of the audited accounts. In practice, however, the publication of the annual report normally occurs with a delay of about one year.

51.  With regard to public disclosure, information on the BOU's annual expenses and revenues is disclosed in the Annual Report as a note to the accounts. The report discloses information on about 15 major items. Information such as income from interest and dividends, license fees, and revaluation gains/losses, as well as such expenditure items as premises, depreciation charges, and other operating expenses are not fully disclosed.

52.  The BOU Governor is also called upon by the parliamentary Sectoral Committee on the Economy to explain current developments that relate to the functions and responsibilities of the central bank under its statute. Such depositions are, however, not published and are more by practice than a requirement under the law. There is no fixed schedule or a requirement for the BOU to make a statement on the monetary situation.

B.  IMF Staff Commentary

53.  The general aspects of monetary policy and operating procedures (such as auction procedures) generally transparent in Uganda. Greater effort is, however, required to clarify and explain the primary goal of monetary policy. More frequent and regular explanations of the BOU's monetary policy signals (including selection of intermediate and operational objectives) would help the market to understand its conduct of monetary operations. Preparation of formal statements on monetary policy would facilitate the BOU's performance monitoring. The BOU Board need to be more proactive in providing regular press briefings on the Board's view on the inflation and macroeconomic outlook and its implications for monetary policy setting, thus improving the public accountability of the BOU and keeping the market participants better informed of the BOU's policy objectives. Transparency would be enhanced if the BOU engaged in regular dialogue with market participants on monetary trends and developments and banking aggregates; publishing and explaining at preannounced intervals adjustments to its monetary policy would also help. The proposed home page on the Internet should be activated at the earliest possible time.

54.  The BOU's role in the government securities market and its guidelines for interbank market operations should be fully documented, published, and explained. An explicit legal basis should be provided for the issuance of central bank bills and for the BOU's authority to buy and sell domestic securities, outright or on repurchase basis, for open market operations.

55.  To facilitate the BOU's task of implementing monetary policy, greater clarity and transparency is required regarding the BOU's role as banker to the government and manager of the public debt. To this end, the proposed memorandum of understanding between the BOU and the Ministry of Finance on the banking relationship should be finalized and publicly explained.

56.  The regular flow and timeliness of information, particularly the publication of quarterly asset and liability statement, annual accounts, and the annual report requires improvement, so as to strengthen the financial accountability and transparency of the BOU's operations. The disclosure of all relevant and material components of revenues and expenses should be improved. The Key Economic Indicators needs wider dissemination.

V.  Banking Supervision

Assesses only the authorities' observance of the transparency elements of the Basel Core Principles.

57.  The Basle Committee on Banking Supervision (Basle Committee) prepared the Core Principles for Effective Banking Supervision (Core Principles) in order to strengthen national financial market supervision and stability.8 Intended to serve as a basic reference and minimum standards for supervisory and other public authorities in countries generally and internationally, the Core Principles address the major dimensions of banking sector supervision: preconditions for effective supervision; licensing process and approval for changes in structure; prudential regulations and requirements; methods of ongoing banking supervision; information requirements; formal powers of supervisors; and, cross-border banking.

58.  An assessment of Ugandan practices against the full set of 25 Basle Core Principles is outside the scope of this study. Instead, this section focuses on the transparency aspects of the Core Principles. The staff's commentary is based on consideration of a questionnaire completed by the authorities and discussion with the authorities at the time of the 1999 Article IV consultation.

A.  Description of Practice9

59.  The BOU is the sole agency responsible for banking supervision and derives its powers and mandate from the Statute and the Financial Institutions Statute (FIS). The supervision function of the BOU has been strengthened since 1993 through increases in both the number and professionalism of the staff. In addition to detailed off-site reporting specified in regulations, the BOU undertakes a program of on-site examinations as permitted (but not required) by the FIS. The number and quality of exams has been increasing, although resource constraints have not yet permitted achievement of the goal of examining all banks every year. Bank subsidiaries and affiliates are active in all aspects of financial services in Uganda, and effective consolidated supervision requires close cooperation among the BOU, Capital Markets Authority, and Insurance commission. At present, the ownership linkages among various financial institutions are not always clear to the regulators, and even where there are known linkages, coordination among the various supervisors is not formalized.

60. There is no explicit statement of the objectives of banking supervision in the legislation. An attempt to define and widely disseminate the role of banking supervision was undertaken in 1997 through a policy statement on intervention which identified three policy objectives to (i) provide for a healthy banking sector; (ii) take action immediately when a problem is identified; and (iii) minimize the budgetary costs of intervention. The policy statement also identified a range of specific steps that would be taken to achieve these objectives, such as prompt intervention in undercapitalized banks, closure of banks unable to adhere to agreed upon recapitalization plans, and strict adherence to the deposit insurance limits. There is no specific requirement in the FIS or the statute for public reporting or accountability for banking supervision activities by the BOU, but the BOU does include a brief overview of the subject in its annual report. Senior management of the BOU is called upon to appear before parliamentary committees on banking supervision issues.

61.  Legal framework. An adequate legal framework for banking supervision currently exists in Uganda. However, a number of areas have been identified where legislative amendment is required to move toward full implementation of the Basle Core Principles. The government has committed to introducing in parliament in 1999/2000 a new FIS, that is expected to make further improvements. Decisions to take supervisory actions, such as intervening in a bank, are, in practice, undertaken only after extensive consultation with the Minister of Finance and senior government officials. This is due, at least in part, to the legal requirement that the BOU must "consult" with the Minister when revoking a bank license. Also, the banking supervisor does not have the complete authority to reject an application for a banking license. Currently, under the FIS, an aggrieved applicant may appeal to the Minister, "who shall deal with the appeal in consultation with the Central Bank." The BOU has wide powers of intervention under the FIS, including seizure, replacement of management and directors, and liquidation.

62.  Accounting and disclosure. The FIS (Part V) lays down the procedures to be followed in the accounting, reporting, audit, and examination of banks. The current statute does not specifically require financial institutions to have adequate internal control and risk management practices in place; however, it is expected that the new FIS will contain more detailed references than the current statute and also provide the BOU with regulation-making authority in this area. The BOU has issued a regulation specifying the approach to be used in classifying loans. All banks are required to provide quarterly reports to the BOU classifying the portfolio into four categories: standard, substandard, doubtful, and loss. The latter three categories constitute "classified loans." Both subjective and objective methods of classification are prescribed.

63.  Financial institutions are required to submit to the BOU annual statements audited by a person qualified under the provisions of the Companies Act. The BOU is empowered to require that audited statements be prepared in accordance with generally accepted accounting standards and such other regulations, directives, policies or guidelines as the Central Bank may issue. The BOU has specified by regulation accounting standards that banks must follow with regard to provisions for loan losses and has provided detailed instructions on the reporting requirements to the Central Bank. However, until the ICPAU adopted the International Accounting Standards effective January 1, 1999, there was no formal definition of generally accepted accounting standards in Uganda.

64.  Basle Core Principles. The current approach followed by the BOU in the areas of the Core Principles, particularly with regard to the disclosure of the true financial condition of banks, is as follows:

  • Principle 9 (dealing with banks' management information systems to identify loan concentration). The BOU has issued regulations on insider transactions. ("Regulation on Credit Extended to Insiders") and single-borrower concentration ("Regulation on Credit Concentration Limits") that specify that financial institutions must keep adequate records and submit quarterly reports to the BOU. External auditors are required to verify the quarterly report, and the Bank of Uganda reviews compliance during on-site examinations.

  • Principle 12 (requiring that banks have systems in place to adequately measure, monitor, and control market risks). Market risks aside from foreign exchange risk are not explicitly addressed in the current legislative and regulatory framework. The BOU requires weekly reporting from banks on their net aggregate position, which must be limited to total foreign currency exposure of no more than 25 percent of a bank's core capital. Introduction of single-currency limits is expected in the new FIS.

  • Principle 13 (relating to banks' internal systems for managing all other material risks). Liquidity risk is addressed by a BOU regulation specifying that 20 percent of demand liabilities and 15 percent of time deposits must be held in liquid assets. Although not expressly required by the FIS or regulations, the BOU does expect and require financial institutions to have policies and procedures in place to cover other risks. Their existence and adequacy is assessed during on-site examinations.

  • Principle 18 (regarding the collection and analysis of reports on both a solo and consolidated basis). The BOU has issued a regulation ("Reporting Requirements for Banks") that specifies the regular returns that must be filed. These all deal with solo reporting. There is currently no requirement for consolidated financial statements or reporting on the parents, affiliates, and subsidiaries (domestic and foreign) of banks that are part of a corporate group.

  • Principle 21 (requiring that banks maintain adequate records, prepared in accordance with consistent accounting policies that enable supervisors to obtain a fair and true view of the financial condition and, that banks regularly publish financial statements). The FIS requires audited annual financial statements and publication of audited balance sheets. The quality and timeliness of completion of audits needs improvement in some cases and balance sheets are not always published as required.

65.  Deposit protection. The Deposit Protection Fund was established as part of the BOU pursuant to Section 34 of the FIS, 1993. The FIS provides that the Minister of Finance shall determine the limit on deposits insured through an order published in the Uganda Gazette. The limit of U Sh 3 million per depositor has not been changed since its introduction; however, in each of the last three bank closures, the government has announced that all deposits are to be paid. The BOU is required by the FIS to submit to the Minister, an annual report of the operations of the Deposit Protection Fund.

B.  IMF Staff Commentary

66.  De jure provisions for banking supervision are generally adequate. Some legal improvements are required, particularly with regard to implementation of consolidated supervision and adequately overseeing the monitoring and management of market risks. Also, the planned removal in the new FIS of the need for the BOU to consult with the Minister of Finance regarding license revocations and liquidations, as well as the possibility of appealing to the Minister should a license application be rejected, will improve the transparency of banking supervision by more clearly establishing the autonomy of the supervisor. However, the more pressing need in improving transparency is to adhere to and enforce the existing legal framework. One area that should be focused on is more accurate accounting and reporting of the financial condition of banks. While the extent of deposit insurance is clearly established in the FIS, in the recent bank closures, the government announced that all deposits would be paid. It is, however, encouraging that both the President and Minister of Finance announced in June 1999 that prompt intervention and adherence to deposit insurance limits will be part of future supervisory actions. This new commitment needs to be formally documented and widely communicated, and will have to be matched with appropriately decisive supervisory action for it to have credibility among depositors and the financial markets. The BOU should consider reporting on, either as part of its annual report or in a standalone document on banking supervision, the actions taken and the state of the banking system vis--vis its established objectives. Greater public disclosure of information by the BOU, including supervisory data on credit concentration and insider transactions, is being contemplated as part of the new FIS; this action would help in disseminating information about the health of individual banks and the banking system.

VI.  Securities Market10

This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a ROSC.

67.  Institutional structure. The institutional responsibility for securities market regulation, supervision, and oversight is vested in the Capital Markets Authority (CMA), established by the Capital Markets Authority statute (1996). The CMA functions independently in its day-to-day operations under a Chief Executive Officer (CEO) appointed by the Board; however, in practice there is active consultation with the executive arm of the government on major initiatives and actions. The rules and regulations under the statute cover licensing; prospectus requirements; establishment of stock exchanges; conduct of business (by licensees); advertisements; and accounting and financial requirements. These rules and regulations have been publicly disclosed through the Uganda Gazette. The CMA operates a Compensation Fund (Section 6 of the statute) for purposes of granting compensation to investors who suffer pecuniary loss resulting from the failure of a licensed broker or dealer to meet contractual obligations. The CMA is obligated to prepare for each financial year a statement of accounts, including an Annual Report on the performance of the CMA and the securities industry. The accounts are audited by the Auditor General and submitted to the Minister for presentation to parliament. The CEO is also called upon to explain to and advise the government on all policy matters relating to the development of the securities market.

68.  The Uganda Securities Exchange (USE), established in January 1998, is authorized to perform a self-regulating function with regard to its operations and its members. The principles under which it carries out this function are stipulated in the CMA-approved USE Rules and Regulations. The USE is working toward creating infrastructure for electronic trading and establishing a central depository system.

69.  Standards. The standards applicable to the Ugandan securities market are contained in the regulations issued under the statute, which mostly conform to the disclosure and reporting standards applicable in Kenya and Tanzania. The financial reporting and accounting standards for securities firms are based on the International Accounting Standards. The CMA has not formally endorsed the standards established by the International Organization of Securities Commissions (IOSCO), but it has attended the last three IOSCO meetings as an observer and expects to become a member of that organization during 1999-2000. Under its statute, the CMA is fully authorized to monitor the securities market and ensure enforcement of existing standards. There is recourse to the judicial system via the High Court.

70.  The CMA is a member of the regional umbrella body, the East African States Securities Regulatory Authorities (EASRA) through a tripartite memorandum of understanding. The main objectives of EASRA are to harmonize the securities laws and standards in order to develop a regional market, a regional exchange, cross-border investment, and cross-border listings. In addition, the CMA has developed relationships with other securities bodies, such as the African Stock Exchanges Association (ASEA), the Securities Exchange Commission (SEC) of the United States, the Financial Services Authority (FSA) of the United Kingdom, and the Financial Services Board of South Africa.

71.  The CMA is reviewing the overall legal regime applicable to the securities market. Introduction of continuous disclosure requirements is planned, while the prospectus and licensing regulation will be strengthened. The objective is to achieve better transparency, accountability, and harmony with related national and regional laws in the securities market. There is only one operational social security fund, the National Social Security Fund, and plans for reforming it to impart greater accountability and transparency in its operations are being formulated. A Collective Investment Schemes statute, which will enable the creation of mutual funds, is under preparation. Although under the law a complainant has recourse to the High Court, one of the proposals is the inclusion of an "in-house" dispute resolution mechanism in the main statute in the interests of expedience. The CMA is establishing public information services and a web site to facilitate dissemination of public information.

VII.  Insurance Market11

This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a ROSC.

72.  Institutional structure. The Uganda Insurance commission, which commenced operations in 1997, was created pursuant to the Insurance statute, 1996. The commission is responsible for regulating and overseeing the insurance industry in Uganda.12 It operates independently in its day-to-day operations and is accountable to the parliament through the Minister. The Insurance statute lays down the objectives of the commission. The regulations relating to the insurance industry are still being finalized, and the commission plans to publish them.

73.  The Insurance statute requires every licensed insurance company and insurance broker to be members of their professional associations and conform to their respective codes of conduct. The Uganda Insurance Commission is responsible for ensuring that this provision of the law is adhered to and that the professional associations are represented on the commission's Board of Directors. The commission has a well-publicized Complaints Bureau, through which the public may lodge insurance-related complaints. Publication through the Uganda Gazette and/or the newspapers and giving wide circulation to certain decisions (such as the licensing of insurance companies and the imposition of penalties) are provided for in the Insurance statute. The statute spells out the financial reports to be submitted to the commission and the requirement that the companies display and publish their balance sheets. The format of reporting will soon be prescribed through a regulation.

74.  In terms of accountability, the Uganda Insurance Commission's financial accounts are audited by the Auditor General and submitted to the Minister. The law, however, does not require the commission to publish the accounts. The commissioners, more by practice than law, appear before the parliamentary Committee on the National Economy and the Minister to answer grievances brought up by the insurers, and to provide information on the insurance industry. The Insurance statute bars the Chairman, the Deputy Chairman, and the commissioner for Insurance from having interest in insurance companies and related institutions, but no protection has been provided under the law during the conduct of their official duties.

75.  Standards. The Uganda Insurance Commission has yet to endorse the standards developed by the International Association of Insurance Supervisors (IAIS), although it is committed to implementing the IAIS Model of memorandum of understanding on exchange of information with other countries. The measures that are followed to enforce existing standards under the Insurance statute include on-site inspections, special audits by audit firms, admonition, denial/suspension of licenses, and the imposition of penalties. Insurance companies and brokers are required to maintain security deposits with the BOU, and the commission periodically explains and discloses information on such deposits.

76.  Payment systems.13 The BOU has the ultimate responsibility in the payment systems area. Although Uganda does not have a consolidated, comprehensive framework governing the provision of payment services and their associated risks, the BOU derives its authority over the payment systems from its statutory mandate to manage the clearinghouse. The clearinghouse settles on a multilateral net basis, governed by clearinghouse rules (Kampala Bankers' Clearing House Rules and Procedures, 1995). No large-value transfer system or real time gross settlement system is as yet operational. Moreover, there has been no explicit attempt to adopt the Lamfalussy standards for settlement. The system ensures the timely completion of daily settlements through funds kept with the BOU and the provides clearing and settlement funds for interbank transactions. The banks give each other overnight loans on bilateral terms. The BOU has taken the lead in reforming and modernizing the country's payment systems. A National Payments Systems Council (NPSC), chaired by the Governor, was established in 1998 as the main policymaking body on payment systems. The NPSC is expected to come up with operational enhancements and recommendations on a vision and strategy for Uganda's payment systems, and to strengthen the legal, regulatory, and institutional basis for oversight of the payment system. It is hoped that the new system will comply with international provisions and practices on risk management. While there is no single law in Uganda that explicitly handles customer/consumer protection on payment systems matters, there are separate payment system-related pieces of legislation, such as the Bill of Exchange and the Penal Code Provisions Regulating the Issuance of False Cheques to ensure fair treatment of customers. The Bankruptcy and Companies Acts protect those customers who are secured creditors, because they are treated as preferential creditors in case of the liquidation and the closure of a bank.

77.  Securities and foreign exchange settlement. The government securities market consists mainly of treasury bills and the BOU bills issued as bearer certificates. There is no delivery versus payment (DVP) system. A central securities depository system is, however, being developed that, when operational, will "dematerialize" the securities. Real DVP will be achieved when the NPSC formalizes and implements the programmed real-time gross settlement (RTGS) system for large-value transfers. Foreign exchange is settled by way of correspondent banking arrangements, and, in general, the settlement is on a T+2 basis. There is no specific publication on payment system transactions nor is information released to the market.

78.  Accounting and auditing. The Institute of Certified Public Accountants of Uganda (ICPAU) is the only statutory licensing body of professional accountants in Uganda. It was established by the Accountants Statute, 1992, but did not commence operations until 1995. The ICPAU is empowered by the statute to establish accounting standards and to act as a self-regulatory organization for professional accountants, which includes requirements for practicing as a professional accountant in Uganda. Uganda does not have its own program of education and examinations for entry into the accounting profession. A professional accountant who is a member in good standing of a recognized accounting association in another country can become a member of ICPAU and thus practice in Uganda. Meanwhile, accounting students in Uganda can enroll in the educational program of a recognized accounting association in another country and gain entry to the profession by meeting that association's examination standards. In addition to about 200 members, who are all professional accountants with a designation recognized in another country, ICPAU has about 20 associate members who were engaged in the practice of accounting prior to the creation of the ICPAU, but lack the necessary professional qualifications. As noted above, the ICPAU adopted International Accounting Standards, which took effect from January 1, 1999. In addition, there is one local standard Uganda Accounting Standard (UAS) 1, dealing with value-added tax. General public awareness of accounting standards in Uganda is low, and, prior to 1999, accountants were free to use their own discretion in determining what constituted generally accepted accounting standards. There are special accounting requirements for regulated entities, such as banks and insurance companies.


Table 1. Uganda: Data Categories and Indicators

Data Categories


Periodicity (GDDS recommendations)

Timeliness (GDDS recommendations)

Real sector

National accounts aggregates GDP (nominal and real) Annual
5 months
(6-9 months)
Production index/indices Manufacturing or industrial Monthly
3-4 months after the calendar quarter
(6 weeks; 3 months for all indices)
  Primary commodity, agricultural production index Not available (As relevant)  
Price indices Consumer price index Monthly
1 month
(1-2 months)
Labor market indicators Employment
Not available
Not available
Not available
(6-9 months)

Fiscal sector

Central government budgetary aggregates Revenue, expenditure, balance financing Annual (Quarterly) 9 months (1 quarter)
Central government debt Domestic debt (by debt holder and instrument)
External debt (by currency, maturity, debt holder and instrument)
1-2 quarters
(1-2 quarters)

Financial sector

Broad money and credit aggregates Net external position, domestic credit, broad or narrow money Monthly
6 weeks after the end of the reference month
(1-3 months)
Central bank aggregates Reserve money Monthly
4 weeks
(1-2 months)
Interest rates Short- and long-term government security rates Monthly
4 weeks
(1 month)
  Policy variable rate (Bank of Uganda rate) Monthly
One week
(1 month)
Stock market   (Monthly) Not available
(1 month)

External sector

Balance of payments aggregates Imports and exports of goods and services, current account balance, reserves, overall balance Annual
12 months
(6 months)
International reserves Gross official reserves denominated in U.S. dollars Monthly
4 weeks
Merchandise trade Total exports and total imports Monthly
3-6 months
(8 weeks-3 months)
Exchange rates Spot rates Daily
Disseminated on a timely basis in publication


Table 2. Uganda: Major Transparency Elements of Monetary and Financial Policies


Under Legislation

By Regulation

In Practice

Mechanism for performance monitoring of the BOU's monetary policy and its operations

Annual Report

BOU statute requires submission of Annual Report to the Minister of Finance. None. Preparation and submission of Annual Report is delayed. Hence, no timely discussion within the government or by the parliament.
Financial statements BOU statute requires preparation, audit, and publication of annual financial statements. Auditing guidelines prescribed by the Auditor General. Publication linked with the Annual Report. Hence, public availability of the accounts is delayed.
Programmed targets No specific provisions have been established for targets. None. There is, however, periodic deposition by the Governor before the parliament on issues of current relevance in the financial sector, but mostly relating to the banking sector.

Transparency of decision making in monetary policy

Publication of decisions No legal requirement. None. Briefly mentioned in the Annual Report.
Publication of divergences with the government BOU statute provides for resolution of conflicts between the BOU and Ministry of Finance. None. No such instance has been disclosed so far.
Publication of minutes of meetings within the BOU No explicit provision for publication of decisions. None. Market participants are generally aware of the critical in-house Committee meeting.
Publication of regulations and directives on monetary policy and monetary operations Not required under law. Technical and operational circulars are required to be issued. Circulars and regulations are not easily accessible. No formal system exists for releasing the regulations and circulars through press releases.

Transparency relating to monetary and fiscal operations

Clear delineation of respective institutional responsibilities relating to foreign exchange, monetary policy, and credit to government and other fiscal operations BOU statute contains specific provisions relating to the BOU's role and functions in relation to monetary policy, foreign exchange policy and credit to government. However, the statute requires the BOU to give advice and to follow monetary and exchange rate policies in consultation with the government. None available In actual practice, the market has recognized the institutional role of the BOU in relation to the foreign exchange and monetary operations, However, at the policy level, the market continues to regard the Ministry of Finance as capable of overriding the BOU. Furthermore, the BOU's role and functions as the fiscal agent require formalization through the draft memorandum under consideration.

Transparency relating to financial provisions governing the BOU and its monetary operations

Legal status of BOU The BOU is a corporate body with perpetual succession. All provisions as provided in the BOU statute.  
Owner of capital The government is the sole subscriber and holder of capital.    
Scope of expenditures disclosed No requirement for approval of BOU budget by the government or parliament.    
Disclosure relating to BOU's solvency The authorized paid up capital may be increased by the parliament to maintain the BOU's operations. In case the capital gets impaired the government shall furnish securities to the BOU.    
Allocation of profits and losses Net profits and losses (after provisions, making good the authorized capital and general reserve) shared between the BOU and the government in proportion of 25 percent and 75 percent, respectively.   The BOU recapitalization has been pending. Consequently, there has been no transfer of profits arising out of the normal operations of the BOU.
Form and frequency of accounts, including disclosure BOU statute requires accounts to be audited at least once every financial year. A quarterly return of assets and liabilities to be submitted to the Minister of Finance and published.   Publication of annual and quarterly accounts is not timely.

Transparency relating to banking supervision

Legal basis for banking supervision Bank of Uganda statute and Financial Institutions statute. Seven regulations issued by BOU pursuant to the Financial Institutions statute. New Financial Institutions Statue expected in 1999/2000 will more clearly establish the autonomy of the banking supervisor by removing the provisions for consulting with, and appeals to, the Minister of Finance in matters of licensing and bank closure.
Definition and dissemination of objectives of banking supervision and related policies Not defined in legislation Government and the BOU jointly published an intervention policy in 1997 Published policy not adhered to, although in June 1999 the government recommitted to a policy of prompt intervention.
Reporting on supervision activities vis--vis objectives and policies No specific requirements No specific requirements Banking supervision briefly covered in BOU Annual Report, and senior management of the BOU have been called to appear before parliamentary committees to address banking supervision issues. Staff of the BOU meet informally on an irregular basis with the Uganda Bankers Association.


Table 3. Uganda: Transparency in Monetary Policy and Financial Sector Regulation: Major Statutes, Agencies, Regulations, and Sources of Public Information


Other Information Sources


Constitution of the Republic of Uganda, 1995 Bank of Uganda Annual Report Bank of Uganda
Bank of Uganda Statute, 1993 Bank of Uganda Quarterly Economic Report Uganda Insurance Commission
Financial Institutions Statute, 1993 Bank of Uganda Monthly Key Economic and Financial Indicators Capital Markets Authority
The Penal Code Provisions Regulating the Issuance of False (Bouncing) Cheques, 1997 Industrial Finance: publication of Bank of Uganda Uganda Stock Exchange
The Penal Code Provisions Regulating the Issuance of False (Bouncing) Cheques, 1997 Code of Conduct of Uganda Bankers Association, 1996 Uganda Investment Authority
The Money Lender's Act Annual budget speech and budget documents Uganda Institute of Bankers
Cooperative Savings and Credit Societies Act Capital Markets: quarterly journal of the Capital Markets Authority Uganda Bankers Association
The Uganda Insurance statute, 1996 PRESTO Publications (a USAID- funded project: The National Payments Systems Council
Capital Markets Authority statute, 1996   Uganda Clearing House
The Bankruptcy Act   The Institute of Certified Public Accountants of Uganda
The Companies Act   Uganda National Bureau of Standards
Privatization and Enterprise reform and Divestitures statute, 1991   Foreign exchange bureaus registered under the Companies Act Professional Insurers Associations
Uganda Investment Code    
The Contract Act    

1An assessment of the Ugandan practices against the full set of 25 Basle Core Principles is beyond the scope of this report.

2Information about the GDDS can be found on the IMF's Dissemination Standards Bulletin Board on the Internet at

3This section has been prepared by the IMF staff on the basis of a questionnaire completed by the authorities.

4The full text of the code can be found on the IMF's external web site at

5This section has been prepared by the IMF staff on the basis of a questionnaire completed by the authorities.

6This section has been prepared by the IMF staff on the basis of a questionnaire completed by the authorities, information obtained from various statutes and regulations, and discussions with Uganda authorities and market participants in May-June 1999.

7The full text of this code can be found on the IMF's external web site at

8For more information, see the BIS web site at

9This section has been prepared by the IMF staff on the basis of a questionnaire completed by the authorities.

10This represents a summary of the authorities' description of practices in this area. No attempt is made to provide an independent view of observance of standards in this area.

11This represents a summary of the authorities' description of practices in this area. No attempt is made to provide an independent view of observance of standards in this area.

12The provision that the BOU supervise the insurance companies has been superseded by the creation of the Uganda Insurance commission, pursuant to the Insurance statute, but the reference to insurance companies remains in the BOU Statute [Section 4 (2) (j)]. Presently, there is neither institutional mechanism nor a memorandum of understanding for coordination among the different regulatory bodies. There is, however, a representative of the BOU and the Uganda Insurance commission on the board of the securities regulators and a BOU representative sits on the board of the insurance commission. The relationship between the insurance commission and the securities regulator is not well laid out, nor widely publicized or understood. However, it will, however, become necessary to define and coordinate their work as banks, businesses, and firms begin operating in the all spheres of financial services, including, banking and insurance, as well as in the securities markets.

13This represents a summary of the authorities' description of practices in this area. No attempt is made to provide an independent view of observance of standards in this area.