Tuesday, May 15, 2012


It disturbs the type of developments some people are able to do in Uganda, while many who sweat are not able to make any comparable developments. This money possibly comes from the following sources: 1. Corruption - a lot of money is lost and ends up as a loss to tax payer, it is possible some of this money is responsible for the upcoming buildings by so-called billionaires, 2. Evading taxes - some people are believed to be evading taxes yet sell goods as if they paid the tax, 3. Some of the money is believed to be a leakage from what the donors give to the country. 4. There are big people who it is said own properties in a disguised way. They have the properties in other people's names. 5. It is believed that a good amount of money is injected through fraud and hence counterfeit currency which boosts the activities of beneficiaries. William Kituuka Kiwanuka BANK OF UGANDA EXPLAINS CAUSE OF INFLATION Bank of Uganda Did Not Cause Inflation Bank of Uganda would like to respond to an article titled, ‘Arrest Mutebile – Besigye’, that was published in Red Pepper, January 18, 2012, page 2. In the story it was reported that FDC President, Dr. Kizza Besigye, alleged that Bank of Uganda (BoU) fraudulently printed and issued Sh.2 trillion under the directive of BoU Governor Prof. Emmanuel Tumusiime-Mutebile, and this is what fueled inflation. BoU strongly refutes the allegation and hereby sets the record straight. 1. BoU’s Constitutional mandate under Article 161 and 162 is to, among other things, promote and maintain the stability of the value of the currency of Uganda and regulate the currency system. It is for this reason that Bank of Uganda is the only entity authorized to print and issue currency. It cannot therefore be true that the Bank fraudulently printed and issued money as this is its legal duty. 2. Secondly, the promotion and maintenance of the stability of the value of the currency of Uganda requires the Bank to take into account the needs of the economy before printing and issuing currency. The statement that it printed money in excess of that required by the economy as reported in the Red Pepper ignores this fact. 3. The amount of money in circulation is public information, issued to the media during the monthly press briefings, and available in various reports published on the BoU website (www.bou.or.ug). These reports indicate the monetary aggregates. The amount of currency in circulation as at November 30, 2011 stood at UGX. 2,030.18 billion. Out of this only UGX.383 billion (18.8%) was old currency. At the end of April 2010, prior to the issuance of the new currency in May 2010, currency in circulation stood at UGX. 1,336.3 billion all of which was old currency. There was therefore a reduction by UGX.953.3 billion in the value of old currency in circulation between its issuance in May 2010 and November 2011. 4. The high inflation that the country experienced last year was due to supply-side shocks; and exchange rate depreciation. The supply-side shocks were mainly a result of drought which caused shortage of food supply. The impact of the exchange rate depreciation was manifested in high oil prices and other imported goods that culminated into imported inflation. Therefore, the inflationary pressures were not due to printing money. 5. In order to control inflation, BoU embarked on a tight monetary policy stance aimed at reducing aggregate demand. As a result, BoU increased the Central Bank Rate (the signaling rate that anchors inflation and exchange rate expectations) from 13% in July to 23% in November, 2011. This curtailed aggregate demand and has translated into the falling annual inflation rate from 31 percent in October to 27 percent in December 2011. Inflation is projected to fall further and reach single digits before the end of the year. 6. The tight monetary policy stance has also resulted into strengthening of the Shilling from Sh2,850 per US Dollar in mid-October to the current level of Sh2,410 per US dollar. This has created a conducive environment for economic activities. 7. BoU, therefore, urges the public to disregard the unfounded allegations and assures the public that the economy is on the right track. The economic challenges being faced now are short-term. MANAGEMENT January 18, 2012

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