A BRIEF HISTORY OF THE UGANDAN CURRENCY, INFLATION AND MUSEVENI AS A MANAGER ========================================== Before 1981 the value of the Ugandan shilling was linked to the IMFs special drawing right ( SDR). In mid-1980 the official exchange rate was USh9.7 per SDR or USh7.3 per United States dollar. When the Obote government floated the shilling in mid-1981, it dropped to only 4% of its previous value before settling at a rate of USh78 per US$1. In August 1982, the government introduced a two-tier exchange rate. It lasted until June 1984, when the government merged the two rates at USh299 per US$1. A continuing foreign exchange shortage caused a decline in the value of the shilling to USh600 per US$1 by June 1985 and USh1,450 in 1986. When Museveni and his NRA came to power, they spent time attacking the Obote 2 government allegedly for mismanaging the economy. Museveni questioned how the Obotes call themselves ministers in a country with a useless currency like the Ugandan shilling that had no value. That was a below the belt punch on Obote who was the Finance Minister. Museveni immediately drafted in Prof Posiano Mulema (of DP) as Minister of Finance and the panacea to the economic & financial difficulties in the country. The new economic strategy announced in August 1986 by the finance minister, Mr. Ponsiano Mulema, a professor of economics, was a disaster. Its centerpiece was a huge revaluation of the Ugandan shilling. Since May 1986, two legal exchange rates had existed: official transactions were carried out at a rate of 1,450 shillings to the dollar and all other transactions at a legal market rate of about 5,000 shillings to the dollar. Transactions also occurred in the informal kibanda market. Mr. Mulema abolished the legal market rate, so all legal transactions would be at the 1,450 shilling rate. Every exporter vowed to keep his money abroad; every would-be importer rushed to get licenses to import at the new, artificially favorable rate. The kibanda rate immediately shot up to 8,000 shillings per dollar. In October 1986, Mulema was replaced by Dr. Crispus Kiyonga, who has a medical background Kiyonga had a difficult task as Finance Minister and was out of his depth. The Donor community demanded that he be replaced immediately. Museveni obliged. In May 1987, the government introduced a new shilling, worth 100 old shillings, along with an effective 76 percent devaluation. Ugandans complained that inflation quickly eroded the new currencys value. As a result, the revised rate of USh60 per US$1 was soon out of line with the black market rate of USh350 per US$1. Following the May 1987 devaluation, the money supply continued to grow at an annual rate of 500 percent until the end of the year. In July 1988, the government again devalued the shilling by 60 percent, setting it at USh150 per US$1; but at the same time, the parallel rate had already risen to USh450 per US$1. President Museveni regretted this trend, saying If we can produce more, the situation will improve, but for the time being we are just putting out fires. The government announced further devaluations in December 1988 to USh165 per US$1; in March 1989, to USh200 per US$1; and in October 1989, to USh340 per US$1. By late 1990, the official exchange rate was USh510 per US$1; the black market rate was USh700 per US$1. It worth noting that the 1966 currency had coins of: 5 cents, 10 cents, 20 cents, 50 cents, 1 shilling, 2 shilling. That currency also had banknotes of: 5 shillings, 10 shillings, 20 shillings, and 100 shillings Fast forward to 1981: A new UPC government came in place in 1981. In 1982 new currency were issued out and same denominations were maintained. In 1983, the denominations of 500 and 1000 Shillings notes were introduced, and had a portrait of President Milton Obote. Museveni did not like this and when he came to power he continued to attack the UPC for the allegedly mismanagement of the economy pointing to the large bills of notes in circulation as proof of economic malaise. Fast forward from 1986 to 2014 and see where we are: In 1986, another issue of currency was made, A new Banknote of 5000 was also introduced. In 1999 new denomination coins of 50, 100, 200 and 500 shillings were introduced. Therefore, on December 31, 2000, Notes of Uganda Shilling 5, 10, 20, 50, 100, 200 and 500 cease to be legal tender. In 1995, a new denomination of 10,000 was introduced. It was later upgraded, and on January 02, 2006, the upgraded 10,000 shilling Banknote was put in circulation. In 1999, Bank of Uganda issued out a new 20,000 banknote. It was also upgraded, and on November 01, 2004, the upgraded 20,000-shilling note was issued. On December 01, 2003, Bank of Uganda issued out a new 50,000-Shilling note. Ladies & gentlement, I leave it to you the reader to make your own judgement about Museveni’s performance of the economy if we are to use the same yard-stick of large bills to mean economic malaise in the country. By the way, what is the exchange rate now (to a US dollar) in Uganda? LOL Thank you Sunday Geoffrey
Posted on: Tue, 02 Dec 2014 05:29:12 +0000
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