Government money printing deal sparks fears of backlash
Kampala- As president Robert Mugabe printed trillions of worthless Zimbabwean dollars, inflation went wild, rising from 1,000 per cent in 2006 to 12,000 per cent in one year, so high that the country’s Central Bank was forced to chop 10 zeros off the currency to ensure that the calculators are not overwhelmed by hyperinflation.
And in the midst of what independent economists and Opposition politicians have called “craziness”, Zimbabwe became the most famous case of hyperinflation in modern history to the extent that citizens, especially in the capital Harare, needed a wheelbarrow to carry the bank notes needed to purchase a piece of bread and other small things. For some time, things got so bad that by the end of 2008, the inflation rate in Zimbabwe hit 79.6 billion per cent mark because of over-printing of money.
Although President Museveni and Finance minister Matia Kasaija see “great prospects” in having a local currency printing factory, the Bank of Uganda Governor, Mr Emmanuel Tumusiime-Mutebile, backed by Opposition leaders, independent economists and civil society activists, warned of a backlash if government insists on a disputed money printing factory the governor called “questionable”.
Opposition leaders, economists and civil society activists who talked to Sunday Monitor, applauded Mr Tumusiime-Mutebile for rejecting the disputed money printing factory in Uganda and warned of an economic meltdown if government insists on the deal. But in the face of mounting opposition, Mr Kasaija, in an interview with this newspaper, called such fears “foolish” and made it clear to the critics that with or without the backing of the governor, the project will go on as planned.
In a November 2 letter to Mr Kasaija, the governor raised objections to the proposed deal and made it clear to those hawking the factory that printing money in Uganda might compromise the security of the country’s currency as a result of “incidents of leakages of printing material or knowledge to counterfeiters.”
Although Mr Kasaija disregarded Tumusiime-Mutebile’s warning and called the fears of an economic crisis “foolish”, experts who talked to Sunday Monitor said in the face of the current financial indiscipline and government appetite for spending on non-productive sectors, with a currency factory in Uganda, the country’s economy will most likely experience a falling GDP, a drying up of liquidity and rising prices due to inflation.
Prof Waswa Balunywa, the principal of Makerere University Business School and other citizens have called the proposal “economically useless” and, therefore, unrealistic, arguing our economy is still small and grappling with the fundamentals of financial management.
“I don’t think the country has sufficient capacity, both printing and security to do it,” Prof Balunywa said. “Besides, it may not be economical unless if different countries pull together to do it. We are a very small economy to do that. We need lots of papers and our money gets dirty easily but that will not reduce cost.”
Mr Julius Kapwepwe Mishambi, the director of programmes at Uganda Debt Network (UDN), said: “It’s not a wise decision to start a money printing factory given the precedence Uganda has had with leakages in public finance management. We cannot guarantee there won’t be similar leakage through inflated printing of volumes of banknotes, or input materials onto the dark market, to the detriment of our economy.”
Like Karuma hydro power dam and such high profile projects, Mr Kapwepwe and other economists said the joint venture between Uganda Printing and Publishing Corporation (UPPC )and a German firm, Veridos Identity Solutions GMBH, already suffered credibility issues when the authorities chose to handpick the company involved.
“Those behind the company may need a kickback that may be printed outside the designated channels. We should be protective rather than increase opportunities for laxity in printing of our currency, for if mismanaged, it will have adverse implication on our economy. How shall we guarantee that with the machine here, politicians won’t simply print currency beyond designated and prudent economic management intentions? Mr Kapwepwe asked.
The head of Public Procurement and Disposal of Public Assets Authority (PPDA), Ms Cornelia Sabiiti, detached her institution from the disputed deal.
“As PPDA, we did not handle that matter [money printing procurement]. It was undertaken by UPPC and mopped under the Public-Private Partnership Act, which is totally separate from the PPDA Act.”
Opposition leaders Erias Lukwago (Kampala Lord Mayor) and Peter Walubiri, a senior constitutional lawyer, asked MPs to block the deal in public interest and warned that any attempts to establish a money printing factory in Uganda will not only be costly, it will be “a recipe for disaster” and asked Ugandans to brace themselves for the perils of “hyperinflationary episodes.”
Mr Kasaija and ICT and Information minister Frank Tumwebaze have since defended the idea of establishing a money printing factory in Uganda as a step in the right direction and applauded the President’s prudence.
“We should commend the President for this wise initiative. It’s pro-Uganda. To acquire capacity to do security printing is good in all aspects. Printing currency/ money and any other sensitive material can all be done. If Bank of Uganda feels unsafe with using domestic capacity built in the country, it’s up to them. Other materials will be printed,” Mr Tumwebaze said.
He added: “Bank of Uganda can benchmark whether printing of currency domestically is bad practice. If they are convinced as such, they can leave but other materials that require security printing like cheques, passports, university academic documents, exams, etc can use that capacity we shall have built as a country.”