The Pearl of Africa as it is famously known, Uganda has a positive economic outlook for 2023 thanks to oil prospects in the western region of the country. But in its crypto space, Ugandans have suffered through fraud and scams, prompting the government to crack down on crypto startups last year.

The Ugandan parliament began criminalizing Ponzi schemes associated with cryptocurrencies, with the Bank of Uganda gave a st ern warning to fintech and banks dealing with crypto trade.

A petition lodged in January 2021 by 5,000 victims of the Dunamiscoins scam, that is alleged to have defrauded Ugandans approximately $2.7 million, was the precursor to the the government’s hard stance on crypto business.

Scam After Scam

*(Kasese District, Uganda / Photo by Unsplash)*

In November 2021, Dunamiscoins Resources Limited opened in Masaka—a city three hours away from Kampala—promising Ugandans huge returns in its plan to become the country’s “digital currency network.” But it ended up closing shop after just one month, with more than 10,000 people losing their money.

Five other cryptocurrency firms suspended operation and vanished with a total of more than $26 million of their clients’ money from October 2019 to February 2020.

Robert Bakalikwira, a criminal investigations officer probing the cases estimated that 200,000 Ugandans have lost about $1 billion, or almost 4% of the country’s GDP of $28 billion between 2018 and 2020.

More Education Rather Than Banning

But that set the tone for more crypto education in the country, convincing the Bank of Uganda to soften its stance against crypto, and going ahead to invite blockchain and Web3 companies to its regulatory sandbox framework.

The government also announced in 2022 that it is mulling introducing a Central Bank Digital Currency, to ease payment services.

The number of crypto owners in Uganda is the lowest in the East African community commanding only 1.16% of the 48.5 million population. This is compared to Kenya’s 4.92% and Tanzania’s 2.34%, according to Triple-A data. However, this number is set to rise in coming years, given the Web3 and blockchain education already ongoing in colleges in the country. Binance has also been offering free crypto classes to Ugandan students.

Here are some notable economic and crypto stories headlining in Uganda in the first five months of 2023:

January – A New Dawn in Oil Prospects

President Yoweri Museveni opened Uganda’s first oil well, a key milestone as the country aims to begin output in 2025. According to Africa News, the field, known as Kingfisher, is expected to produce 40,000 barrels of oil per day at its peak. Uganda discovered oil reserves almost 20 years ago but drilling was hampered by lack of infrastructure.
Uganda presented a positive economic outlook for 2023. Real GDP growth will accelerate to 5.9% in 2023 as construction work on the Lake Albert Oil Project gains momentum and moderating inflation bolsters consumer confidence, Fitch Solutions reported.

February – Saying No to Debt

The Uganda Shilling was fairly stable against the US Dollar, trading at an average rate of Ushs 3,685.7/USD in February from Ushs 3,693.6/USD recorded in Jan 2023. This was an appreciation of only 0.2%, as dollar demand nearly marched supply, the Ministry of Finance, Planning and Economic Development said in its February report.
The Finance Ministry said that the government will not engage in any external borrowing in the next financial year beginning July 2023. The borrowing which was heavy in the energy, transportation and infrastructure projects was banking on the expected oil revenue to clear the debt, Reuters reported.

March – Declining Inflation

The country’s inflation rate is easing due to decreased energy and food prices, according to a report by the Uganda Securities Exchange. Inflation edged lower in the three months to March 2023 closing the period at 9.0% compared to 10.2% recorded at the close of Q4 2022 in December.

April – Restating the Stand on Crypto

The Uganda Securities Exchange reported a steady decrease of the All-Share Index from 1,213.79 to 1,148.25 a 5.71% decline in the first quarter of 2022. This trend was due to changes in different market prices and the KES/UGX exchange rate, the USE said.
The High Court in Uganda threw out a case challenging the declaration by the Bank of Uganda that cryptocurrencies were banned in the country. The court said that the BoU’s April 2022 directive does not infringe on individual property rights. Instead, the directive is an attempt by the central bank not to legalize the “undefined system as a payment instrument in Uganda”, Bitcoin.com stated.

May – Increased Spending

Uganda’s parliament has approved the government’s plan to raise spending by 10% to $14.19 billion in the 2023/24 fiscal year, the East African wr o te. Ugandan law requires lawmakers to approve the government’s spending plans for a specific fiscal year before they are officially laid out in a budget speech.

-Edited by Faustine Ngila, Shigeru Sato