In a recent report from the Bank of Uganda, it has been revealed that the amount of money in circulation has seen an increase. The growth, equivalent to Shs 487 billion, represents a 7.1 percent expansion in the period ending June 2023. This growth is attributed to the expanding economy.
The report highlights that the total value of money in circulation during the year ending in June rose from Shs6.8 trillion to Shs7.3 trillion. The net value of banknotes in circulation witnessed an increase of Shs477 billion, rising from Shs6.6 trillion in June 2022 to Shs7.1 trillion. Additionally, the value of coins increased by Shs9.9 billion, mainly due to heightened demand for cash in response to increased economic activity.
The Central Bank also reported its efforts to maintain clean currency in line with currency policies. The currency department of the Bank of Uganda sorts cash deposited by commercial banks and introduces both new and old banknotes into circulation. During the 2022/23 financial year, the currency department sorted banknotes worth Shs10.3 trillion, marking an 8 percent increase from the Shs9.6 trillion sorted in the previous financial year.
However, it is worth noting that this increase was less substantial compared to the 14 percent growth recorded in the year ending June 2022 when money in circulation rose by Shs818 billion from Shs6 trillion to Shs6.8 trillion. The report also highlights the impact of the COVID-19 pandemic, which led to a decline in money in circulation to Shs5.7 trillion in the year ending June 2020. It later rebounded, growing by 24 percent to Shs6 trillion, following the partial reopening of the economy that had been affected by COVID-19 restrictions.
Bank of Uganda’s report further indicates that reissued notes increased by 19 percent, with Shs7.9 trillion (76 percent) out of Shs10.3 trillion sorted being returned as reissued currency. There was also a noticeable increase in the cost of currency issuance, largely due to a 16 percent rise in new notes, increasing from Shs172.3 billion to Shs199.3 billion.
The Bank of Uganda projects a rising demand for money, emphasizing the need to enhance processing efficiency to mitigate the growing cost of currency issuance. The bank’s statement outlines its commitment to working with the banking sector to improve efficiency in the cash value chain to ensure that the overall cost of currency issuance aligns with the demand for cash driven by macroeconomic conditions.