The Bank of Uganda (BoU) has revealed it is conducting a comprehensive cost-benefit analysis on the potential replacement of low-denomination banknotes with coins.
This development, which has been shared with officials from the International Monetary Fund (IMF), is part of a broader initiative by the central bank to enhance the efficiency of currency management in the country.
In a statement, BoU noted that small-denomination notes, such as the Shs 1,000 and Shs 2,000, are subject to rapid wear and tear due to frequent handling in everyday transactions. The central bank says this high rate of degradation leads to substantial replacement costs that continue to strain Uganda’s currency printing budget.
“Notes in lower denominations have a very short circulation life, sometimes lasting just a few months before becoming unusable,” a source familiar with the matter noted. “This means we are constantly reprinting them, and that cost adds up.”
In contrast, coins are more durable and can remain in circulation for decades without needing replacement. According to central bank analysts, although the initial minting of coins may appear more expensive than printing paper money, the long-term benefits in terms of durability and reduced recurrent costs make them a viable alternative.
The central bank is, therefore, weighing the financial and logistical implications of the transition, including public acceptance, production costs, and distribution efficiency.
If adopted, the move would align Uganda with several countries in the region and globally that have already transitioned to coins for lower denominations. Notably, coins are already in use for denominations such as Shs100, Shs200, and Shs500.
BoU officials emphasized that the decision is still under review, and public consultations and stakeholder engagement will play a significant role in finalizing the shift.
“Public awareness and cooperation will be crucial if we are to implement this successfully,” the official added.