Tables of Modern Monetary Systems by Kurt Schuler ( Return to home page )


Uganda

Political sketch

Formerly the East Africa Protectorate and part of British East Africa. Independent from the United Kingdom on 9 October 1962.

Arabs reached Uganda in the 1840s, trading in ivory and slaves. The first European explorers came in 1862, and Christian missionaries followed. When the king of the powerful Buganda nation died in 1884, his son persecuted Christians. Muslim Arabs soon seized control of the kingdom and continued the practice, while expelling the son. The son regained power with the help of a Christian tribe, but the kingdom soon came under European domination. A treaty with a German emissary was made in 1889, but an Anglo-German agreement of 1890 declared what is now Uganda to be a British sphere of influence. Also in 1890, the Imperial British East Africa Company agreed to administer the region on behalf of the British government, and soon made a treaty of protection with Buganda and later other kingdoms. The British government declared a protectorate over Buganda in 1894, taking over from the company, which could not afford the military expenses involved. Under British rule Uganda became an important exporter of cotton and other agricultural products. In 1945 the first Africans were nominated to the Legislative Council, and in 1955 a ministerial system was implemented, but the protectorate government faced alternating support and opposition from the influential rulers of Buganda.

Uganda became independent from the United Kingdom on 9 October 1962. In 1966 Milton Obote of the Lango tribe ousted president Mutesa II, the king of Buganda, and took over as president. Major General Idi Amin ousted Obote in a coup of 1971. Amin's rule was brutal. He expelled Asians from Uganda in 1972, persecuted many tribes, and ran the economy into the ground. Late in 1978 Amin invaded Tanzania. Tanzanian forces responded by combining with rebel groups to invade Uganda and overthrow Amin in 1979. Obote was elected president in 1980, but he was deposed in July 1985 by a military coup. The new military rulers were overthrown in January 1986 by the National Resistance Movement, led by Yoweri Museveni; he is still in power today (2005). A constituent assembly promulgated a new constitution in 1995. Uganda participated in the civil wars in Zaïre (Congo-Kinshasa) in the 1990s to gain resources and secure its borders. It also faced a small but vicious rebel group known as the Lord's Army in the north of the country. Uganda's main export is coffee.

Wars since 1500

Ugandan Religious Wars, 1885-1892; Ugandan Mutiny of 1897 (of Sudanese troops hired by the United Kingdom; Ugandan Civil War of 1978-1979 (Tanzania was involved); Ugandan Guerilla and Civil Wars of 1986-present; Lord's Resistance Army Insurgency, 1995-present; Congolese (Zaïrian) Civil War of 1996-1997 (Uganda supported certain rebel groups); Congolese (Congo-Kinshasa) Civil War of 1998-2003 (Uganda supported certain rebel groups).

Convertibility

The sterling area:

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.

The East African Currency Board:

In 1921, Kenya, Tanganyika (now mainland Tanzania), and Uganda were switching from silver coins to the pound sterling as their anchor currency. At one point the market rate of the Indian silver rupee fell as low at 16 Indian rupees = UK£1, versus an official conversion rate of 10 Indian rupees = UK£1 in East Africa. To discourage arbitrage between the market rate of and the official rate, the East African Currency Board on 12 February 1921 limited to UK£35,000 a week the amount it would allow banks to remit through it to London. The limit excluded remittances for the account of colonial governments. The limit was removed perhaps after July 1921.

Uganda alone:

On 11 June 1965, Uganda extended to all sterling area countries, except Kenya and Tanzania, the exchange control measures that had previously applied only to other countries. Kenya, Tanzania, and Uganda all left the sterling area on 23 June 1972. Uganda liberalized all capital-account transactions on 1 July 1997.

After establishing separate central banks, Kenya, Uganda, and Tanzania continued to cooperate monetarily in some ways. Until late 1971, the notes of any of the three countries could be exchanged without restriction in any commercial bank of the other states. Uganda suspended such convertibility of its notes in late 1971; Tanzania and Kenya soon followed, so that by early 1972 it was illegal to carry more than 100 shillings of each country's currency across national borders, nor did commercial banks in one country any longer exchange notes of the other two countries.

Other

The East African Currency Board gained much of its initial circulation in 1920 by exchanging its own notes and coins for Indian rupee coins. At the time, the rupee was floating against the pound sterling, which had in effect abandoned the gold standard when the First World War broke out in 1914. The price of silver, the metal of which the rupee was made, was at a high level against the pound sterling in 1920. The East African Currency Board had not secured a promise from the government of India about the exchange rate against the pound sterling at which India would redeem rupee coins. Between the time East African Currency Board notes and coins replaced Indian rupees and the time the currency board presented the rupees to the Indian government, the price of silver fell substantially. The board incurred similar losses replacing German East African silver rupees previously circulating in Tanganyika (now the mainland of Tanzania). As a result, the East African Currency Board began its existence with foreign reserves of less than 100%, although the board maintained 100% reserves at the margin and acted in an orthodox manner. In 1925, reserves were only 43.6% of the board's East African £5.61 million of notes and coins in circulation. During the worldwide depression that began in 1929, circulation fell, hitting a low of East African £3.57 million in 1932. Reserves fell even faster, to only 9.9% in 1932. Member governments extended a guarantee of East African £1.5 million to the board to borrow pounds sterling if necessary, but the board never used the guarantee because its reserves soon began to increase as prosperity returned. Circulation increased substantially during the Second World War as British victories over Italian forces in Eritrea, Ethiopia, and Somalia resulted in the East African shilling replacing the Italian lira as currency. The foreign reserves of the currency board first reached 100% in 1950, which was also the first year the board made payments of seigniorage to member governments. (This information comes from various issues of the East African Currency Board's annual report.)

After establishing national currencies to replace the East African shilling in 1966, the Kenyan, Tanzanian, and Ugandan shillings continued to be equal, except for a few brief periods, until 20 January 1979, when Tanzania devalued and definitively ended the tradition of the successor currencies moving in lockstep.

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1980-1993 (foreign currency bank debt, oil and interest rate shocks).

Reinhart and Tokatlidis (2000: 33) dating of recent financial liberalization: Domestic (notably interest rates) 1988, external (notably foreign-exchange market and participation by foreign financial institutions) 1990.

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): A brief run on Barclays Bank (Dominion, Colonial and Overseas) in May 1951; a crisis 1990-?; half of the banking system faced solvency problems 1994-?.

Frankel and Rose (1996) list of currency crashes: 1981.

References

Primary sources:

--Laws and decrees:

East Africa Protectorate. Gazette. 1898-1908. The Official Gazette of the East Africa and Uganda Protectorates. Mombasa (1898-1904?); Nairobi (1904?-1908): Government Printer. (Succeeded by Uganda gazette.)

Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.

Uganda. Gazette. 1908-present. The Official Gazette of the Uganda Protectorate; later The Uganda Protectorate Official Gazette; later The Uganda Gazette. Entebbe: Government Printer. (Successor to East Africa Protectorate gazette.)

--Publications of monetary authorities:

East African Currency Board. Annual report. 1920/1921-1971/1972. Report of the East African Currency Board for the Year ending 30^th June... (1920/1921-1959); Report for the Year Ended 30^th June ... (1961/1962-1970/1971); The Final Report of the East African Currency Board (1971/1972). London: Waterlow and Sons (1920/1921-1958/1959); Nairobi: Government Printer, Kenya (1959/1960-1964/1965), Printing and Packaging Corporation (1965/1966-1970/1971); East African Currency Board (1971/1972).

Bank of Uganda. Annual report. 1966/1967-present. First Annual Report (1966/1967); Annual Report (1967/1968-present). Kampala: Bank of Uganda.

Bank of Uganda. Bulletin. 1968-1971, 1992?-present. Quarterly Bulletin (1968-1971); Quarterly Economic Report (1992[?]-present). Kampala: Bank of Uganda.

--Web site of the current monetary authority (viewed 20 September 2005):

<http://www.bou.or.ug>

--Other publications or Web sites:

Uganda Commercial Bank. 1993-2001? Quarterly Economic Review. Kampala: Uganda Commercial Bank. (This was a large bank owned by the government until sold to a private bank at the end of 2001.)

Uganda. Ministry of Planning and Economic Development. 1969-1974? Quarterly Economic and Statistical Bulletin. Entebbe: Government Printer.

Main secondary sources:

Bank of Uganda. 1991. Bank of Uganda: Silver Jubilee, 1966-1991. Kampala: Bank of Uganda.

Henry, J[ames] A., and H. A. Siepmann. 1963. The First Hundred Years of the Standard Bank. London: Oxford University Press. (The Standard Bank operated widely in Africa.)

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

Njala, A. S., and S. A. Obura. 1971. "Evolution of the East African Currencies."Quarterly Bulletin (Bank of Uganda), v. 13, no. 2, March: 51-5.

Ross, W[illiam] McGregor. 1927. Kenya from Within: A Short Political History. London: George Allen and Unwin.

Van Zwanenberg, R[oger] M. A., and Anne King. 1975. An Economic History of Kenya and Uganda 1800-1970. London: Macmillan.

Monetary authorities: Uganda

Exchange rate arrangements: Uganda