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Money in circulation increases by Shs487b
Money in circulation has been growing due to an increase in economic activities. Photo / File
What you need to know:
- During the year ended June, money in circulation increased from Shs6.8 trillion to Shs7.3 trillion due to expansion in the economy
Money in circulation increased by Shs487b, representing a growth of 7.1 percent in the period ended June 2023.
The growth contained in the Bank of Uganda annual report, noted that during the year ended June, money in circulation increased from Shs6.8 trillion to Shs7.3 trillion due to expansion in the economy.
The report indicates that the net value of banknotes in circulation increased by Shs477b from Shs6.6 trillion in June 2022 to Shs7.1 trillion, while the value of coins increased by Shs9.9b on account of increased demand for cash in response to increased economic activity.
The Central Bank said that to maintain clean currency in line with the policy on currency, the currency department sorts cash deposited by commercial banks and issues both new and old banknotes into circulation. During the 2022/23 financial year, currency department sorted banknotes worth Shs10.3 trillion, a growth of 8 percent from the value of Shs9.6 trillion sorted in the previous financial year.
However, the increase was lower than the 14 percent recorded during the year ended June 2022, in which money in circulation rose by Shs818b from Shs6 trillion to Shs6.8 trillion.
Money in circulation had declined to just Shs5.7 trillion in the year ended June 2020, but recovered to grow by 24 percent to Shs6 trillion due to the partial opening of the economy, which had suffered under Covid-19 related restrictions.
Bank of Uganda also noted that reissued notes rose by 19 percent, of which out of Shs10.3 trillion sorted, Shs7.9 trillion (76 percent) was returned as reissued currency. The report also indicates an increase in the cost of currency issuance, resulting from a rise in new notes which rose by 16 percent from Shs172.3b to Shs199.3b.
Bank of Uganda also projects an increase in demand for money, which calls for the need to maximise efficiencies in processing turnover to cushion the growth in the cost of currency issuance.
“Bank of Uganda will continue to work with the banking sector to enhance efficiencies in the cash value chain … as a result, the overall cost of currency is expected to be in tandem with demand for cash driven by macroeconomic conditions,” Bank of Uganda said.
