Kampala – Government agencies have been ordered to stop awarding domestic contracts to various contractors in foreign currencies.
In a 15th January 2016 letter to all government agencies and local governments, Mr. Keith Muhakanizi, the Secretary to The Treasury warned that the awarding of contracts in foreign currencies was piling pressure on the Uganda Shilling.
“… this practice has significantly contributed to the increased pressure on the Uganda Shilling resulting into its depreciation and budget shortfalls which culminate into supplementary expenditure,” Mr Muhakanizi said in the letter.
He noted that the entire budgeting process is done in Uganda Shillings, yet expenditure is done in dollars when contracts are being awarded.
Considering that the Uganda Shilling depreciated by 27 percent against the dollar in the last two years, that means government expenditure on dollar-denominated contracts has gone up. The additional expenses arise out of requiring more Uganda Shillings to pay for dollar-denominated contracts.
“Therefore in order to streamline the budget implementation and minimise shortfall and supplementary requests, all government contracts shall only be issued in Uganda Shillings going forward,” he added.
Government agencies spend money on contracts to supply materials, build office facilities, consultants, repair contracts and infrastructure projects. Muhakanizi warned that accounting officers who do not comply will have committed an offence that can attract a punishment of four years if convicted by a court of law. He noted that this would not affect already existing contracts.