Businesses and money changers have suffered major disruptions following the suspension of the Kenyan currency conversion in Uganda.
Consequently, many have seen the value of their money they had fall but also had to contact their friends near the border to help them do conversions in Kenya.
In a statement last evening, Bank of Uganda said it had been informed by the Central Bank of Kenya (CBK) that they have issued a new series of banknotes effective May 31, 2019, with a view to combat illicit flows and counterfeits into Kenya.
“Bank of Uganda will not accept Kenya Shillings at its counters with immediate effect,” BOU said in a statement. “CBK has also suspended currency conversion and repatriation of Kenya currency.”
Julius Karombe, the coordinator of the Uganda Maize Exporters Association, said to avoid the impact, traders whose goods are already in Kenya are asking to be paid in Uganda shillings.
He told this publication that those that have taken goods to Kenya are paid in the bank and they are able to receive an electronic conversion and can withdraw Uganda shillings. Those with cash, he said, they have connections at the border and people are able to cross, exchange money and come back.
He said those who have the money in the bank were not affected because it is up to the bank to liaise with Bank of Uganda and Central Bank of Kenya (CBK) and give them new series.
But some bankers the problem is that there is still limited access to the new Kenyan shilling series.
Stephen Kaboyo, who runs the Alpha Capital forex bureau, said: “Until yesterday, we were trading KES normally. The announcement has taken the market by surprise. Our expectation is that this will be short-lived and business will be as usual.”
Money changers said they went to the banks where they have accounts and their money was rejected.
Madoi Bruhan, a money exchanger in Mbale, said that business is now on standstill since morning and with people staying away from the Kenyan currency.
Madoi adds that Equity Bank has also stopped doing business with them since the announcement was made.
Mutwalib Masaba, the chairperson of the money exchangers in Mbale, said the prices for the Kenyan currency have dropped because no wants to take it. He says that on Monday, they were selling the currency at 36.6shs but now it has dropped to 34 shillings.
Uganda traders do their business with Kenya more than anyone else in the region.
Commercial banks today allow conversions of KES despite earlier indications that they would change smaller notes and leave the KES 1000.
A banker told this publication on Tuesday “Most banks are looking to dispose off cash they have in the vault. No one in the industry is buying – even forex bureaus.”
He said the day was characterized by “a lot of confusion. We are no longer taking any cash in Kenya shillings.”
Those who went to the banks to do normal banking were also turned away.
Andrew Muhimbise went to Equity Bank in the morning with KES 2000 in the 1,000 denominations. The manager told him the BOU announcement took immediate effect and they would not take the notes.
He said he was going to put it on the buses headed to Kenya, where people are buying at discount and taking the money back to Kenya.