The 2022/2023 annual report by Bank of Uganda has revealed that the Central Bank spent Shs199bn to print and issue new currency in Uganda.
“As the Bank issued more new currency to meet the economy’s demand during the period 2022/23, currency issuance costs also grew by 16% from Sgs172.3Bn in FY2021/22 to Shs199.3Bn in 2022/23,” the report reads in part.
It should be recalled that in March 2020, President Museveni issued a directive to have all Government security documents including; currency, election materials, passports, identity cards and driving licenses printed within Uganda so as to save money.
However, in September 2021 while appearing before Parliament’s Finance Committee, Adam Mugume, Director of Research & Policy at Bank of Uganda warned against such a move revealing that Uganda has no capacity to print its own currency notes, arguing that Currency printing is very sophisticated and the process comes with various particular security features.
He also added that the option of Uganda setting up a factory to print money isn’t cost effective because international printers print for the global currency not just one nation.
Mugume also told Parliament that Bank of Uganda spends 70% of its budget on printing money and stablizing the shilling and the contracts to print money are awarded to different firms to print each note so as to ensure that the shilling has integrity.
In the 2022/23 annual report, Bank of Uganda also revealed that in order to maintain currency in line with the policy on currency, the currency department sorts cash deposited by commercial banks and issues both new and reissue banknotes into circulation.
During the FY2022/23, currency department sorted banknotes amounting to Shs10.3Trn, a growth of 8% from the value of Shs9.6Trn sorted in the previous financial year. Out of the Shs10.3Trn sorted, Shs7.9Trn was returned as reissue, while Shs1.775Trn was cancelled and Shs682.74Bn was shredded online.
The Central Bank added that the demand for cash as reflected by withdrawals of banknotes and coins from the central Bank increased by 14% from an outturn of UGX10.2Trn in FY2021/2022 to UGX11.6Trn.
Bank of Uganda further revealed that in order to achieve its core mandate of issuing legal tender to facilitate transactions throughout the country, they carried out the circulation of money and the value of currency in circulation grew by Shs487Bn from Shs6.8Trn in 2022/2023.
The net value of banknotes in circulation increased by Shs477Bn from shs6.6Trn in June 2022 to Shs7.1Trn in June 2023 while that of coins increased by Shs9.9Trn and this was on account of increased demand for cash in response to increased economic activity.
According to Bank of Uganda, the Shs50,000 notes commanded the largest share of notes in circulation as at 30th June 2023 accounting for 46% followed by Shs20,000 notes at 25% and Shs10,000 notes at 17%. Coins, Shs1000 note and Shs2000 notes were the least banknotes in circulation commanding 3% and 2% respectively.
