The Bank of Uganda has denied claims by opposition leader Dr Kizza Besigye that it caused the current inflation by printing banknotes worth two trillion shillings in 2011.
Besigye told journalists early this week Bank of Uganda under the direction of Governor Emmanuel Tumusiime Mutebile printed the new currency and in effect created the current inflationary situation.
The current inflation rate is 27 percent, down from 31 percent in late 2011.
But in a press release issued on Thursday, the central bank denied ever causing the inflation. It instead blamed the situation on supply-side shocks like drought and high global fuel prices which increased local food and fuel pump prices and exchange rate depreciation.
The Bank of Uganda said to reign in inflation, it embarked on a tight monetary policy stance aimed at reducing money in circulation and high demands.
As a result, the BoU increased the Central Bank Rate (CBR) – the rate at which it lends to commercial banks – from 13 percent in July 2011 to 23 percent in November 2011 up to date.
The press release says as a result aggregate demand was curtailed leading to a fall in inflation from 31 percent in October 2011 to 27 percent in December 2011.
The central bank says inflation is expected to fall further down to single digits before the end of the year.
The press release signed off as by Bank of Uganda Management says printing of new currency is a constitutional mandate and therefore not fraudulent as alleged.
The Bank of Uganda reveals that the amount of currency in circulation as at November 30, 2011 stood at slightly over two trillion, 18 percent of which is old currency.