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Uganda Currency and Inflation
Between 1981 and 1988, the government repeatedly
devalued the
Ugandan shilling in order to stabilize the economy. Before
1981
the value of the shilling was linked to the IMF's special
drawing
right
(
SDR--see Glossary). In mid-1980 the official
exchange rate
was USh9.7 per SDR or USh7.3 per United States dollar.
When the
Obote government floated the shilling in mid-1981, it
dropped to
only 4 percent of its previous value before settling at a
rate of
USh78 per US$1. In August 1982, the government introduced
a twotier exchange rate. It lasted until June 1984, when the
government merged the two rates at USh299 per US$1. A
continuing
foreign exchange shortage caused a decline in the value of
the
shilling to USh600 per US$1 by June 1985 and USh1,450 in
1986. In
May 1987, the government introduced a new shilling, worth
100 old
shillings, along with an effective 76 percent devaluation.
Ugandans complained that inflation quickly eroded the new
currency's value. As a result, the revised rate of USh60
per US$1
was soon out of line with the black market rate of USh350
per
US$1. Following the May 1987 devaluation, the money supply
continued to grow at an annual rate of 500 percent until
the end
of the year. In July 1988, the government again devalued
the
shilling by 60 percent, setting it at USh150 per US$1; but
at the
same time, the parallel rate had already risen to USh450
per
US$1. President Museveni regretted this trend, saying "If
we can
produce more, the situation will improve, but for the time
being
we are just putting out fires." The government announced
further
devaluations in December 1988 to USh165 per US$1; in March
1989,
to USh200 per US$1; and in October 1989, to USh340 per
US$1. By
late 1990, the official exchange rate was USh510 per US$1;
the
black market rate was USh700 per US$1.
All of the government's efforts to bring the economy
under
control succeeded in reducing the country's staggering
inflation
from over 300 percent in 1986 to about 72 percent in 1988.
Then
the government contributed to rising inflation by
increasing the
money supply to purchase coffee and other farm produce and
to
cover increased security costs in early 1989, a year in
which
inflation was estimated at more than 100 percent. Low
rainfall
levels in the south contributed to higher prices for
bananas,
corn, and other foodstuffs. Shortages of consumer goods
and
bottlenecks in transportation, distribution, marketing,
and
production also contributed to rising prices. Moreover,
the
depreciation of the United States dollar increased the
cost of
Uganda's imports from Japan and Europe. The government
tried to
curb inflation by increasing disbursements of
import-support
funds and tightening controls on credit. These measures
helped
lower the rate of inflation to 30 percent by mid-1990, but
by
late 1990, inflation had once again resumed its upward
spiral.
Data as of December 1990
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