Banking services in most countries are intended to facilitate all kinds of transactions as well as helping people and organisations save and manage their financial resources. When I came to Uganda in 1967, I wanted to open a bank account so that I could manage my small resources and make international transactions between Belgium and Uganda. I walked into Grindlays bank in Mbarara and asked to open a bank account. Presenting my passport, a small sum of money to kick start the account and filling in some forms was sufficient for me to be in possession of a tool which would help me over the years. It was indeed all so simple then compared to today.
But unforeseen events may happen in a country, and the military take-over by Idi Amin in 1972, (my next blog will tell you more), was certainly not foreseen, and it was to have severe repercussions on the economy of the country. Already in the years preceding this military coup, the economy was in a weak position, and, as a consequence, slowly a parallel economy grew. Uganda being essentially an agricultural country, such a shift to a parallel economy happened without major problems because all major transactions were cash based. And so we began to witness the first signs of a monetary devaluation as the Uganda Shilling slipped to always lower levels. In 1967 I could buy a gallon of petrol for 7 shillings, which was the equivalent of one US dollar. In 1972 the dollar was exchanged at 60 shillings on the official market and close to 500 shillings on the parallel market.
This situation brought me into trouble with the archbishop of Kampala. I was living at Ggaba National Seminary and some colleagues received donations in various currencies from friends and relatives. They wanted a decent exchange rate and the finance department of the archdiocese was giving them the official exchange rate, which was indeed the right thing to do for an official body. But then some colleagues came to me and asked if I could cash their cheques and give them a decent exchange. So I simply gave them the parallel exchange rate and everybody was happy. The recipient had a good amount for their cheques but I was stranded with a certain amount of cheques in foreign currencies! What to do? I decided the only way forward was to send these to my bank in Belgium and have them deposited on my bank account so that I could refund the value of the cheques to the person who had given me a good exchange rate directly into his bank account, wherever it was. But the archbishop got word about my dealings and duly showed his displeasure. “You should not do that and all these cheques should come to me so that I give them the official rate”. But I did not believe what I heard because I knew that he himself was changing all his cheques at the parallel rate. I bluntly refused as I knew that he would pocket an undue sum of money by just counting on double exchange rates. I received a dark look but it ended there as he knew what I knew!
All this parallel economic activity had also an impact on the official banking sector of Uganda. In 1972, I had to travel to Belgium for the wedding of my sister, and obviously needed to buy an airline ticket. But … to get this I needed hard currency, as Sabena Airlines (now Brussels Airlines) did not accept Uganda Shillings. In any case, to travel outside the country one needed a clearance from the Ministry of Internal Affairs stating that I was a “Bona Fide” person (a thing I have always thought I was!). It was then that they gave permission to the Bank of Uganda to issue the exact amount in US Dollars to cover the cost of the ticket. So, I walked to the Bank with all the required papers and arrived at the main banking hall. There were very few people except some police officers and few bank employees. I enquired where I had to go and they showed me to a teller who was in charge of giving out foreign currency for travellers. The girl, very polite and helpful, asked me what I wanted, looked at my papers and calculated quickly that my ticket of USD 450 would cost me 27,000/= UGX. Whilst waiting for the transaction to be completed I noticed that above her counter was written “Window 1”. The next teller had “Window 2”. The girl, again very helpful, explained to me that “Window 2” was for exchanging foreign money into UGX and that I would get the parallel market rate! Slightly puzzled I told her that I wanted to exchange some money and she showed me to “Window 2”. Now here comes the crux. I just wondered what I should do to buy Foreign currency. So again, the very helpful girl informed me that I could purchase Foreign money at “Window 1” at the official rate. The rest of the story is simple to understand and someone with a little bit of acumen would understand what was about to happen. At the end of my stay at the Bank of Uganda I left the place with my 450 dollars for my ticket but in fact I had paid exactly 100 dollars for the ticket. Cheap travelling is certainly possible if one uses a bit of imagination! I admit it borders the limits of (dis)honesty but based on a shrewd mind! I have no regrets especially that over the years I did manage to help a good number of colleagues who were in need of some liquidities to live their lives!
After the Amin years, things would slowly stabilize but the immediate result was that the Governor of the Bank of Uganda, a former top official at the World Bank, had to put in place severe restrictions for financial transactions. The good thing was that the new government had opened the door to free foreign exchange transactions that enabled the country to see an inflow of hard currency supporting the economy. But at the same time, the money had to regain its real value compared to other currencies and slowly the exchange rate stabilised around 2500 UGX per US dollar, some ten years ago (now at a lower rate of 3600). This has, of course, an immediate effect on personal savings, but with a bit of imagination and trust in the local economy it is possible to have your savings yield sufficient returns so as to make your life more comfortable. After so many years, the Ugandan economy has regained its strength and can withstand even difficult moments where and when it is assaulted by various outside forces. It has taken years to get there but I think we can now say that the banking system in Uganda has reached maturity and can easily compete with major financial institutions in the world. I recall one year, a friend of mine who was a senior banker in Belgium, visited us and showed real surprise at the quality and efficacy of our banking system especially compared to other countries he had visited.
But those early years were “interesting”, to say the least, and I often chuckle when I think about the possibilities that economy offered us.
But those early years were “interesting”, to say the least, and I often chuckle when I think about the possibilities that economy offered us.But those early years were “interesting”, to say the least, and I often chuckle when I think about the possibilities that economy offered us.