Finance to ban transcutions in foreign currency
United States dollars and Uganda currency across the counter
By Our reporter
KAMPALA – The government has finally embarked on the enforcement of the directive that compels public contracting entities to stop conducting public procurement and payment in foreign currencies. The directive exempts foreign missions that are allowed to use the currencies in the countries in which they are based when contracting and paying.
Keith Muhakanizi, the then Permanent Secretary and Secretary to the Treasury, reiterated the government decision in 2017/2018 and 2018/2019, saying that it was meant to “preserve the sanctity of the Uganda Shilling” since the budget is appropriated in the easily convertible local currency. While issuing the 2023/2024 Budget Execution Circular, PSST Ramathan Ggoobi expressed displeasure at the large number of accounting officers requesting him to sign contracts in foreign currencies, especially United States Dollars and Euros.
He said that this was contrary to the fiscal and monetary policies agreed with the Bank of Uganda.
“All contracts for works, goods and services shall be awarded in Uganda shillings to hedge cost overruns due to global forex rates fluctuations that impact the stability of the shilling,” he said then, adding that all contracts, including those that follow international competitive bidding procedures, shall be quoted in Uganda shillings.
”However, at that time, there was apparently not adequate enforcement of the directive on the part of the Attorney General. “I request the Honourable Attorney General’s chambers to take note and enforce the guidelines while approving agreements,” said Ggoobi at the time. In the 2025/2026 Budget Circular last week, Ggoobi expressly directed heads of agencies to the procurement processes in foreign currencies.
“In line with the principles agreed upon with the Bank of Uganda, I wish to reaffirm this Ministry’s standing directive that since the budget is appropriated in Ugandan shillings, all procurements and payments must be conducted in Uganda shillings,” he said, and added that the requirement is intended to safeguard the integrity, competitiveness, stability and value of the shilling.
The directive also affects all planned procurements on the e-GP (the online procurement portal) and the Integrated Financial Management System (IFMS), which, he says, should be undertaken in Ugandan shillings to mitigate cost escalations arising from fluctuations in global foreign exchange rates.
Ggoobi says in the new circular that all contracts-including those under international competitive bidding, must be quoted in Ugandan shillings, except where financing agreements with Development Partners explicitly require the use of foreign currencies in both the bidding and payment process.
The PSST says that Uganda collects its revenues in Ugandan shillings and therefore, spending the revenues in foreign currencies adds cost through conversion, which the government wants to avoid now.
Also, using foreign currency while paying for services and/or goods supplied to the governments increases the foreign exchange pressure on the local currency, as it leads to increased demand for the foreign currency. This is why, according to Ggoobi, there is a need to protect the Shillings’ “sanctity”.
The fluctuation of the foreign currency can also be problematic, especially when the said currency appreciates. This is so because the procurement process takes time, from initiation to payment.
This means there is the risk that by the time of payment, the currency has appreciated against the shilling, and hence more shillings are needed to purchase the required amount of the foreign currency that it was at the time of contracting.
According to the Public Procurement and Disposal of Assets Authority, in the financial year 2023/2024, the lead time under Open Domestic Bidding is 121 days against an indicative timeline of 100 days, while for Open International Bidding, the lead time is 237 days against an indicative timeline of 110 days.
