Bank of Uganda set to replace Ksh.38 paper notes with coins

The Ugandan government is considering phasing out low-denomination banknotes and substituting them with coins, in a move that seeks to tame the high cost of printing.

Ugandan publication The Daily Monitor says the country’s Finance Minister Matia Kasiaja and Bank of Uganda Executive Director Research Adam Mugume, in a letter to the International Monetary Fund (IMF) in June, noted that an increase in printing costs for banknotes has necessitated a market study to see which ones can be replaced with coins.

“Given high currency printing costs, we have conducted a market study to compare printing costs, and a cost-benefit analysis of replacing low denomination banknotes with coins,” the joint letter reportedly read.

Although Mugume did not reveal the progress, he said the Central Bank will first phase out the Shs1,000 (Ksh.38.95) paper note before moving on to others.

“The entire Shs1000 note will be gradually withdrawn. The notes are heavily used in transactions and, therefore, soiled heavily, which renders them unusable or reduces their lifespan. We have to reprint them frequently, yet the cost of printing relative to value is quite high,” Mugume told The Daily Monitor.

The pronouncement comes even as the East African nation has in the past wholly replaced more minor currencies ranging from Shs1 to Shs500 with coins.

The Bank of Uganda in 2012 issued a Shs1,000 coin in its commemoration of 50 years of independence and the coin is still in circulation even though it is less visible compared to the paper notes.

The country’s Central Bank has cited durability and easy handling of the coins as a more preferred form of currency.