In 1987, I happened to be one of those who were involved in the currency exchange as a staff of Uganda Commercial Bank (UCB) where value coins (silver and copper) were made value less on exchange! This is where the state took 30% of all people’s monetary wealth without a law properly backing this transaction which in the final analysis made useless people’s savings. It was a terrible sight seeing the badly mutilated bodies of our workmates at Mulago Hospital who died in vehicle accidents in Western Uganda as new currency was moved from one area to another. I remember the Late Mangeni, he was so friendly, I don’t know whether his children have been cared for.
In that exchange, a person who had shs 1,000,000 got 7,000/- in new currency! (the formula used was divide by 100 and multiply by 0.7. If you want to appreciate how the new currency has lost value; immediately after the exchange in 1987, the cost of traveling from Kajjansi Trading Centre to Kampala which is 8miles away was shs 50equivalent to shs 7,143 (Old currency). Today in May 2010 it costs shs 1,000 which if changed to old currency is shs 142,857! In simple terms you can say that the cost of goods and services has been multiplied by a factor of 20 given what it was on exchange. The reason for this development among others is simply politics prevailing over viable economic decisions, hence depreciating the currency; not forgetting the counterfeiting of currency. You can imagine the VAT at 17% is simply a wrong policy moreover where Government ‘invests’ in consumption by among other strategies increasing the administrative budget from time to time. We are now told each of the new districts requires shs 500m says the Electoral Commission Chief – Engineer Badru Kiggundu! There are areas that are obvious that can create value for the country hence boost the value of the shilling like Agro – processing Industrialisation, unfortunately, Government is yet to realise these. The policy which creates a favourable business climate but discourages Government from doing business should be equally scrapped. This favours mostly foreign investors not the locals without capital and trading skills.
William Kituuka
"The May 26 Daily Monitor reported that the Bank of Uganda had admitted that about Shs13 trillion circulating in Uganda was forged money, representing roughly 0001 per cent of all the money in circulation."
The question is "How is it possible to forge so much amount of money without Government being able to catch those who are big dealers?
William Kituuka
New Notes Aimed at Fighting Counterfeit
Ismail Musa Ladu
11 May 2010
Introduction of the new currency notes is aimed at guarding against counterfeit, a Bank of Uganda top official has said. Mr Juma Walusimbi, the director of communication at BoU, said after every seven to eight years, new notes with enhanced features must be introduced.
"There has been an increase in counterfeit Uganda currency because it has not been changed for a long time," he said at the KFM Hot seat show last week.
The BoU Director of Currency, Ms Naomi Nasasira, said the new currency will have the same value when it becomes a legal tender by the close of the week.
"We have only introduced new notes whose value has not changed at all," Ms Nasasira said. This means that the value of the new Shs2,000 or the enhanced Shs50,000 will locally have exactly the same value against other currencies such as dollars.
Shillings in circulation increase
By Angelo Izama
Posted Tuesday, May 11 2010 at 00:00
The total amount of money in circulation in the Ugandan economy has increased from Shs1.284 trillion (about $1 billion) in February to Shs1.85 trillion as of last week.
The amount of money in circulation is mainly owed to government spending in the last few months, a financial expert has revealed. He adds that this is seen from the actions of Bank of Uganda in reigning in on the currency by auctioning more Treasury Bills and also increasing the rate at which the TBs are sold to make them more attractive.
“Also the length of the TB has for a while been long (for example two years) but the bank has gone back for shorter 91 day TB’s to make it attractive,” the expert who preferred anonymity told Business Power last week.
Given that this is an election year - and because of the ever growing size of public administration expenditure - it is unlikely that the situation will reverse.
“I think we need a separate analysis on what the efforts to mop up excess liquidity will have on lending across the counter since commercial banks will be enticed to tie up their money in TBs,” he said.
With a further $2.7 billion in reserves, it puts total liquidity in the economy of 30 million people at approximately $4 billion, according to Bank of Uganda officials.
Mr Juma Walusimbi, the Bank of Uganda Director for Communications, told Business Power last week that the money in circulation fluctuates especially at the end of every year.
The figure of Shs1.284 trillion is from February this year while in September 2008 the total figure, known as the Mnote - or money in circulation, was Shs1.1 trillion. It rose in December 2008 to Shs1.2 trillion and to Shs1.3 trillion in December 2009.
“The figure tends to go up during holidays because people are spending more on shopping,” he said. While launching the new currency notes, the Central Bank Governor Emmanuel Tumusiime Mutebile said the bank had acted independently and without “government interference” hinting at the controversial timing of the currency improvements.
2010 is an election year for Uganda and could independently vary the amount of money in circulation as political parties pump billions of shillings to canvass for votes.
In suggesting that the central bank was acting on its own - Prof. Mutebile sought to reassure the country and investors that inflation - the rise in the general level of prices of goods and services in an economy over a period of time - was not a problem.
According to the bank, the new currency notes will be eased into the pool “organically’. “They will be issued against commercial bank holdings. When banks come to pick their balances, they will be given new notes where required,” Mr Walusimbi said last week.
“It’s a natural process. We are not pumping new money. Existing currency notes will be replaced this way.” Uganda has strong macro-economic credentials focusing mainly on its fiscal policy especially control of the money in supply.
However, critics - including the Governor - have in the past pointed out that a huge public administration expenditure bill means that liquidity is the main focus of the bank leaving other instruments of potential Central Bank participation in the market largely dormant.
It also worries government policy makers since government spending is still dependant for a large part on external borrowing- especially from Western donors and financial institutions.
In periods of excess liquidity, the bank moves to “mop up” by issuing Treasury Bills at attractive rates to suck up money from the market seeking to avoid large downward or upward spikes in supply.
However, the result is that interest rates- pinged on Treasury Bills have remained endemically high as commercial banks invest in Central Bank financial instruments and shift focus from across the counter customers.
Fake money, robbery linked to high inflation - Source: http://observer.ug/index.php?option=com_content&view=article&id=121:jeff-mbanga&catid=38:business&Itemid=68
Business
Written by Jeff Mbanga
Thursday, 05 June 2008 04:22
Finance Ministry warns: investors could leave if crime is not checked
While runaway commodity prices have forced some households to delete some items from the menu, others are resorting to life threatening means of making extra money.
At the same time, as some people choose to reduce the number of meals per day, or the quantity per meal, the unscrupulous are turning to crime to make ends meet. This has exacerbated crimes such as forging bank notes and daytime street robbery.
Robert, a boda boda cyclist stationed along Clement Hill Road, has been forced to skip lunch due to the bull-run in price of food.
“Food is expensive these days. A plate of food (at open eating places) goes for Shs 2000, yet I used to spend much less than that some time ago. If you add on the cost of fuel, what will I take home?” he asked.
Critical observers have linked the suffering resulting from hard economic times to the current crime wave, warning that it could worsen if prices continue to surge.
Nicholas Kilimani, a research fellow at the Makerere University-based Economic Policy Research Centre, noted that “as people fail to adapt to these changes they might resort to unscrupulous means to survive.”
And Robert Zoellick, the World Bank Group president, recently hinted that the poor could be heading for more difficult times.
“While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs, and it is getting more and more difficult everyday,” he said.
Forecasts by international bodies indicate a longer spell of increased prices of commodities. “Over the next 10 years they (agricultural commodity prices) are expected to average well above their mean levels of the past decade,” notes a report by the Food Agricultural Organisation and the Organisation of Economic Co-operation and Development that was released last week.
Inflation has largely been pushed up by an increase in oil prices, which at more than $130 a barrel is the world’s record high.
In Uganda, fuel stations are selling diesel at more than Shs 2,500, adding to the production costs of business.
The increase in costs is usually passed on to the consumer in form of higher commodity prices.
As an indication of the tough times a head, the Bank of Uganda has stated that the desired inflation rate of 5% is unattainable in the current situation. Uganda’s inflation has recently hit double figures, the highest in recent history – presenting a tricky scenario for the struggling poor.
At least a third of Uganda’s population leaves on less than a dollar (Shs 1, 700) a day – money not enough to buy half a kilo of beef in Kampala. More than half the population lives on less than $2 a day – which is not even enough for a meal for a family of five.
These statistics could go a long way in showing the time bomb that Uganda’s economy is sitting on. Countries like Haiti, Bangladesh, Mozambique, Egypt, have seen riots break out in protest of high food prices.
The crime surge has indeed cast a bad image on Uganda’s business environment.
A top official of the Internal Security Organisation (ISO) says crime and inflation indeed go hand in hand. “There is a link between unbearable life, due to negative macroeconomic policies and increasing criminality like it is in South Africa. That is why there is strong correlation between inflation and crimes,” said Teddy Sseezi-Cheeye, the Director, Economic Affairs & Monitoring in ISO.
However, Judith Nabakoba, the Police spokesperson, disagreed that the recent spike in crime has anything to do with the hardships people are going through to afford basic needs. She said most of the people implicated had a recent criminal record.
Recently, the Police arrested more than 200 suspects in the city centre – in what has been interpreted as a move to restore confidence among the business community.
Already, the Central Bank has sent out a red alert over a rise in fake currency notes in circulation.
Juma Walusimbi, the Communications Director, Bank of Uganda, says the fraudsters are targeting the Shs10,000 and the Shs 50,000 bank notes. The notes, he says, are normally issued at fuel stations and in public transport vehicles.
The Ministry of Finance, Planning and Economic Development is worried that rising crime might keep away prospective investors.
According to the 2008/2009 National Budget Framework Paper released in March, “The overall crime rate (based on reported crime) has risen from 345 in 1999 to 748 crimes committed per 100,000 people in 2006. This increase is validated by 47% of Ugandans who perceive crime to be on the increase and which inhibit confidence and restrains the public from productive activity and investment.”
To fight crime, the minister is set to increase the budgets of ministries responsible for justice, law and order. The Ministry of Finance will push up the budgets of these institutions (Police, Judiciary, Prisons, etc.) from Shs 234bn to Shs 242bn in the next financial year.
jmbanga@ugandobserver.com
No comments:
Post a Comment