Central Bank to curb big elections spending

 

KAMPALA - Bank of Uganda is to tighten control of the currency in circulation ahead of the 2016 general elections to prevent a rise in inflation, the governor, Tumusiime Mutebile, has said.

 

Mutebile, however, maintained that the Central Bank was not to blame for inflationary pressures that resulted in high commodity prices and interest rates.

 

“There were reports that the Central Bank printed excess money for the last elections. That is absolutely false,” Mutebile said.

 

“Our work is to print money for the Government, but I cannot determine how it should be used. That level of spending was catastrophic to the economy and it will not happen this time,” he stated.

 

Mutebile was speaking at the 10th annual meeting of the African Science Academics at Lake Victoria Serena Resort in Kampala on Tuesday.

 

The meeting brings together delegates from science academies of Zimbabwe, Nigeria, Ethiopia, Uganda, Senegal, Kenya, South Africa, Cameroon, Ghana and the US to discuss ways to promote local ownership of Africa’s development in the post-2015 era.

 

In an interview with New Vision, Mutebile agreed that the circulation of new and old currency notes during the 2011 general elections could have compounded inflation.

 

“It is true there could have been distortion, but wiping out old currency is a gradual process that we later successfully completed,” he said. He, however, declined to elaborate on the specific measures to be undertaken to curb spending ahead of the 2016 general elections.

 

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Bank of Uganda

 

In his lecture on the role of central banks in the post-2015 era to promote local ownership of monetary and fiscal policies, Mutebile outlined four key pillars of central banks.

 

These are;

He warned governments against persistently borrowing from central banks to finance budget deficits, saying it creates distortions in the market.

 

He also cautioned against pushing central banks to give loans to private firms for development projects, proposing that such funding should be provided for in the national budget.

 

He said the cardinal roles of a central bank were to control the amount of money in circulation, the interest rate, issuance of legal tender and acting as lender of last resort.