The Observer (Kampala)

12 June 2012

Uganda: Is the Shs 50 Coin Losing Value?

The long-horned cow - a symbol of heritage in some parts of Uganda - lies at the back of the Shs 50 coin.

The cow is a revered animal but while it will retain its significance in society, it's symbolic significance on the Shs 50 coin is losing value. The coin remains in circulation but people don't attach any value to it.

There are growing fears that it will soon join other low denomination coins of Shs 1, Shs 2, Shs 5, Shs 10 and Shs 20 coins on the irrelevance scale. In fact, a big section of the public has no idea these denominations are in circulation, although they are given as loose change at high-end shopping malls like Shoprite Lugogo.

This is the paradox of such low denomination coins. While they are needed because they help break down prices to affordable levels, they are losing value because hardly anything - not even chewing gum - can be bought using a single coin of these proportions.

Bank of Uganda introduced the coins in 1998 to curb price increases. Before the coins were introduced, prices usually increased in the denomination of Shs 100. This means that if a sweet, which cost Shs 100, was to increase, it would jump to Shs 200 - a 100% price increase. Along the way, this added pressure on the fight to stem inflation.

But one gets a sense that the coins haven't done much in curbing price increases. For example, while Bank of Uganda introduced the coins for this purpose, it has also gone ahead and issued a new Shs 50,000 note. Bank of Uganda, however, explains that the coins were mainly to be used in the villages, where low denomination transactions are common.

"We popularized the use of low denomination coins which are useful in small value transactions especially in the rural areas," Governor Emmanuel Tumusiime-Mutebile said.

Bank of Uganda also introduced the coins to support the notes, which were becoming easily tattered, and therefore costly to print every now and then. Also, many notes were being forged. The coins, it was thought then, would solve all these problems. And indeed the coins made a huge impact.

However, more than 10 years later, the very purpose for which some coins were introduced is losing relevance. While the Shs 100 to Shs 500 coins remain active, many people feel that the Shs 50 coin is simply a burden, one they are willing to dispose of. Haruna Kakooza, a student at Kibuli secondary school, who ideally should find the Shs 50 coin valuable, feels he is better off without it.

"Things that used to cost Shs 150 like PK chewing gum, Britania biscuits now sell at Shs 200, Shs 300," he observed.

Sadat Byaruhanga, a shopkeeper, says the high cost of doing business in Uganda has meant that the prices of goods such as sweets once sold at low prices have had to increase.

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