Bank of Uganda officials yesterday told Parliament that Uganda can’t afford to print its own currency because the “process is sophisticated and therefore contacting a local company would be overly expensive”.
While speaking to MPs of the Finance Committee, the director of research and policy at the Bank of Uganda, Mr Adam Mugume, said setting up a local currency factory doesn’t make economic sense.
“Setting up a factory to print money internationally isn’t cost effective because they print for the global currency. The cost of printing one note will be very expensive because you are looking at your own note,” Mr Mugume said.
Mr Mugume said at least 70 per cent of its budget would be spent on printing the country’s currency and sustaining the integrity of the Ugandan shilling.
“You need different printers for particular denomination with different security features, different quality of paper. If the government printer can do it and meet the security features, well and good,” Mr Mugume said.
He added that any attempts to push through the proposed currency printing deal might cause problems.
“Saying you [give] everything to one printer in Uganda is very risky. The risk of counterfeits is about 0.1 per cent. In every country there are counterfeits, there is no doubt about that even the United States Dollar has counterfeits.”
Mr Mugume was responding to Elgon County MP Ignatius Wamakuyu, who demanded that the Central Bank officials update the legislators on the progress made to implement President Museveni’s call to print Uganda’s currency locally.
“You said the cost of operations largely lie with printing of currency and recently, the President ordered that all those securities be printed at Uganda Printing and Publishing Company. I don’t know if you have taken that initiative or print currency from abroad,” Mr Wamakuyu said.
In March last year, President Museveni directed then Prime Minister Ruhakana Rugunda to ensure that all security documents such as passports, identity cards, driving licences, and local currency be printed within the country as a means of saving the country from heavy costs incurred when government contracts foreign firms to execute such tasks.
The lawmakers also tasked the Bank of Uganda officials to explain the reason behind the high lending rates among commercial banks.
“The lending rates are a bit high for common Ugandans and this is beginning to manifest. We got a number of messages after taking oath of the commercial banks trying to send to you money when you haven’t expressed interest,” Ms Jane Pacuto, the Packwach District Woman MP, said
She added: “This shows there is a lot of liquidity in the bank and borrowers aren’t there. I am afraid one of these days there will be open market to lend money.”
In response, Mr Mugume said: “Bank of Uganda regulations, under liberalised financial system cannot control interest rates directly. Once the financial sector starts developing, some of these issues will be resolved, our interest rates will start behaving.”
In 2018, President Museveni witnessed a memorandum of understanding with a German company, Veridos Identity Solutions Group.
Under the deal, the firm was expected to print Uganda’s security documents like passports, cheques, and bank notes.
During the meeting, Mr Museveni noted that the new venture would save Uganda a lot of money that it has been spending on printing documents from abroad.
Bank of Uganda governor Emmanuel Tumusiime Mutebile, however, rejected the proposed money printing deal saying such a move would increase counterfeits in the country.