While the BOU is reportedly planning to revise the country’s financial laws to enable the adoption of a CBDC, the likelihood of Ugandan’s CBDC issuance will be shaped by local conditions. Regulators fear that its issuance will pose a possible risk to financial inclusion, particularly to the elderly who are unfamiliar with technology and rural communities that have restricted access to the internet. That concern would be relevant if a CBDC displaced cash.
The country already has a relatively high unbanked population with only 28% of Ugandans reported having bank accounts in 2015. As with other African countries such as Kenya, mobile phone payments are prevalent in Uganda, with cash on and offramps enabled by local kiosks rather than banks. According to Bank of Uganda statistics, there are 32 million mobile payments accounts out of a population of 45 million, although only about two thirds of the accounts are active.
Proponents of CBDCs are supportive of the move, insisting that such a digital currency would enable Ugandans to move money cheaply and in real-time. However, Charles Abuka, Executive Director for Operations at the BOU, warned that it is important to “establish properly what is the rationale, why must we have it, what issues is it going to help us resolve.”
Abuka also highlighted other implications that come with the issuance of CBDC. For example, the technological architecture to support the CBDC issuance will come at a cost to the central bank, and digital currencies may be susceptible to cyber-attacks, which the central bank will have to guard against.
With the latest news, Uganda joins other African nations which are at various stages of exploring the issuance of a CBDC, such as Nigeria, Ghana and Kenya. However, Ugandans are relatively poor compared to these three countries with a GDP of under $1,000 per person, compared to the other three that all have figures above $2,000. That would impact smartphone penetration which is relevant for a CBDC.
In late January this year, the BOU’s longest-serving Governor Emmanuel Tumusiime-Mutebile’s passed away with no replacement yet announced.