Cash remains king in Uganda as money in circulation hits Shs10 trillion

Despite the growing use of mobile money, internet banking and other electronic payment channels, demand for physical cash in Uganda continues to rise, with currency in circulation crossing the Shs10 trillion mark for the first time in the year ended June 2026.

Bank of Uganda’s (BoU) Annual Report for 2025/2026 shows that currency in circulation increased from Shs8.967 trillion to Shs10.043 trillion, representing growth of Shs1.076 trillion.

The increase points to the continued importance of cash in everyday transactions, even as digital payment services expand.

BoU says cash is expected to remain the dominant means of payment in the short to medium term, partly because of gaps in digital infrastructure and the relatively high cost of electronic transactions.

To meet the demand, the central bank is increasingly relying on banknotes that have already been in circulation but remain fit for use, reducing the need to issue newly printed currency.

During the financial year, BoU issued banknotes worth Shs14.163 trillion, up from Shs12.501 trillion in the previous year, according to its banknote issuance figures.

Of this amount, reissued notes accounted for Shs9.556 trillion, compared with Shs8.242 trillion a year earlier. New banknotes contributed Shs4.607 trillion, up from Shs4.259 trillion.

This means previously used but still serviceable notes accounted for about 67 percent of the value of banknotes issued during the year.

The bank attributes this to its sorting operations, which identify notes that are still fit for circulation and return them to the banking system, while withdrawing those that are worn out or damaged.

“The relatively high proportion of reissued notes reflects the effectiveness of the banknote sorting process in facilitating the recirculation of fit notes, thereby reducing reliance on new banknote issuance,” the report states.

Printing costs fall

The increased reliance on reissued notes coincided with a decline in the cost of printing and minting currency.

BoU’s financial statements show that notes-printing costs fell from Shs193.757 billion to Shs177.848 billion, a reduction of Shs15.909 billion.

Coin-minting costs also declined from Shs9.803 billion to Shs6.493 billion, bringing total currency costs down from Shs212.620 billion to Shs200.313 billion.

However, the bank spent more on maintaining currency-processing machines, with the cost rising from Shs5.483 billion to Shs11.066 billion.

The accounts also show that deferred currency costs, which cover the production of notes and coins not yet issued into circulation, increased from Shs113.858 billion to Shs162.215 billion.

BoU explains that printing and minting costs are recognised as expenses when the notes and coins enter circulation. Costs for currency awaiting issuance are held as deferred costs.

Poor handling increases replacement costs

Beyond improving the sorting and recirculation of banknotes, BoU is also seeking to extend their useful life by encouraging the public to handle currency properly.

The central bank identifies folding, stapling, writing on notes and exposing them to moisture and dirt as practices that accelerate wear and tear, increasing the number of unfit notes that must be withdrawn and replaced.

The bank says it continued public-awareness campaigns on proper handling and began assessing alternative materials that could make future banknotes more durable under local conditions.

It is also exploring ways of reusing material from destroyed banknotes. The report says shredded currency is converted into briquettes for use as an alternative fuel in industrial operations.

However, BoU acknowledges that it does not yet have comprehensive data and an established framework for measuring greenhouse-gas emissions across the currency lifecycle.

The central bank also reports continued demand for exchange and redemption services at its branches, particularly for damaged and mutilated notes, despite similar services being available through commercial banks.

Looking ahead, BoU expects demand for cash to remain strong, supported by economic growth, household consumption and public investment.

It says it will continue working with commercial banks to improve cash-processing efficiency and ensure timely availability of currency.

The figures suggest that the growth of digital payments has not displaced cash. Instead, the central bank is having to manage both systems, while finding ways to make physical currency last longer and reduce the cost of replacing worn-out notes.