Uganda's monetary and financial sector has gone through dramatic change since the government adapted free market reform from 1987 onwards. Two of the most important reforms were the devaluation of the Uganda shilling (USh) and the liberalization of the exchange rate system. In order to make national exports cheaper and more competitive on world markets the USh was devalued by 77 percent in 1987; after subsequent minor de-valuations, it was again substantially reduced by 41.2 percent in 1989. The liberalization of the exchange rate system was undertaken in a number of stages, culminating in the establishment of a unified inter-bank market for foreign exchange and the commercialization of all foreign exchange transactions, which were to be undertaken by commercial banks and foreign exchange bureaus.
By 1994 the government accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF's Articles of Agreement, which maintained a commitment to a free and open exchange system. The Uganda shilling had become a competitive monetary unit, open to the speculation of international currency markets. This resulted in its depreciation from USh100 per U.S. dollar in 1987, to
|Exchange rates: Uganda|
|Uganda shillings (USh) per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
USh965 in 1994. Although these policies had initial inflationary consequences (as late as 1991-92 annual average inflation was 42 percent), by 1994-95 the USh had stabilized at only 5 percent; considering that inflation had hit 1,000 percent during the Amin era, this is a considerable government success. Uganda's capital markets are based on 2 main organizations: the Uganda Securities Exchange (USE), and its regulator, the Capital Markets Authority (CMA). In June 1997 the USE was licensed to operate as an approved stock exchange and began formal trading operations in January 1998. In 2001 there were only 4 listed securities trading on the exchange: 2 corporate bonds and 2 companies, Uganda Clays Limited and British American Tobacco, Uganda.