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Central bank governor Emmanuel Tumusiime-Mutebile, during a recent press conference. PHOTO BY STEPHEN WANDERA
By ISMAIL MUSA LADU
Kampala. The Governor Bank of Uganda has suspended printing of money during elections, fearing such money would end up facilitating political campaigns.
Mr Emmanuel Tumusiime-Mutebile also fears that printing money at such a time would fuel inflation such as the one that hit the economy after the 2011 elections.
Speaking at the Uganda Bankers Association annual dinner last Friday, Mr Mutebile said he is not prepared to print any money to finance public expenditure because it is already catered for in the National Budget.
Mr Mutebile instead said should the need arise, he will issue treasury bills and bonds to raise the money.
Treasury bills and bonds
A treasury bill is a short-term debt obligation issued by the government as a primary instrument for regulating money supply and raising funds via open market operations.
Treasury bonds normally have a longer maturity period.
The governor said: “The main source of concern for the medium term inflation outlook expressed by many people in the private sector is fiscal policy, largely because of the presumed dictates of the electoral cycle.”
He added: “Fiscal deficits which are financed by the central bank through the printing of money are much more inflationary than those financed by borrowing from the market as the latter leaves the money supply unchanged.”
However, Mr Mutebile further argued that despite such fears, the central bank is ready to deal with eventualities such as inflationary shocks that pose threats to the economy.
“…While I have little doubt that inflationary pressures are likely to mount over the next two years, I hope to convince you that we have the macroeconomic framework and the monetary policy tools to manage these pressures and to hold inflation in check,” Mr Mutebile said.
A treasury bill is a short-term debt obligation issued by the government as a primary instrument for regulating money supply and raising funds via open market operations.
Treasury bonds normally have a longer maturity period.
The governor said: “The main source of concern for the medium term inflation outlook expressed by many people in the private sector is fiscal policy, largely because of the presumed dictates of the electoral cycle.”
He added: “Fiscal deficits which are financed by the central bank through the printing of money are much more inflationary than those financed by borrowing from the market as the latter leaves the money supply unchanged.”
However, Mr Mutebile further argued that despite such fears, the central bank is ready to deal with eventualities such as inflationary shocks that pose threats to the economy.
“…While I have little doubt that inflationary pressures are likely to mount over the next two years, I hope to convince you that we have the macroeconomic framework and the monetary policy tools to manage these pressures and to hold inflation in check,” Mr Mutebile said.
Inflationary measures
“Inflationary pressures are likely to arise mainly because of stronger domestic demand from the private and public sectors, and because of the pass-through to domestic prices of the nominal exchange rate depreciation which has taken place this year,” the governor added.
According to Mr Mutebile, it would be a cause for alarm if inflation over the medium term (ahead of elections) is driven up much higher than the five per cent target. However, he said such threat will be kept at bay.
Efforts to speak to Secretary to the Treasury Keith Muhakanizi yesterday were futile as he could not pick our repeated calls.
At the dinner, the governor was recognised by the Uganda Bankers Association for his outstanding contribution in the banking industry over the years. The second award was presented to Principal Judge Yorokamu Bamwine.
“Inflationary pressures are likely to arise mainly because of stronger domestic demand from the private and public sectors, and because of the pass-through to domestic prices of the nominal exchange rate depreciation which has taken place this year,” the governor added.
According to Mr Mutebile, it would be a cause for alarm if inflation over the medium term (ahead of elections) is driven up much higher than the five per cent target. However, he said such threat will be kept at bay.
Efforts to speak to Secretary to the Treasury Keith Muhakanizi yesterday were futile as he could not pick our repeated calls.
At the dinner, the governor was recognised by the Uganda Bankers Association for his outstanding contribution in the banking industry over the years. The second award was presented to Principal Judge Yorokamu Bamwine.
THE BACKGROUND
In a recent interview with Daily Monitor, the seasoned economist denied ever printing money during the last elections. He instead said the elections could have been unknowingly funded by the central bank through a series of treasury Bills that were issued to the government. The governor said it is not his role to determine how the government uses money got from treasury bills.
In a recent interview with Daily Monitor, the seasoned economist denied ever printing money during the last elections. He instead said the elections could have been unknowingly funded by the central bank through a series of treasury Bills that were issued to the government. The governor said it is not his role to determine how the government uses money got from treasury bills.
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