The Bank of Uganda is reducing the circulation of the Uganda shillings in an attempt to strengthen the local currency against the dollar and stabilize the economy.
The Director of Research at the central Bank Adam Mugume says the move is vital because the Central Bank uses the money in circulation and money held by Commercial Banks to control the economy.
Mugume explains that commercial Banks who borrow from Bank of Uganda are charged an interest of 10% making it less attractive for inter-Bank borrowing which is at 9%.
The move is the latest in efforts to curtail current inflation that stands at above 11% and to give the Uganda shillings some ground on the US dollar.
Despite early week gains, the Uganda shilling has in recent days been dropping in value to the US dollar, with US$1 being exchanged for 2,360 Uganda shillings.