Uganda’s central bank has initiated a program to purchase locally-produced gold, aiming to strengthen its depleted foreign reserves and navigate challenges in global financial markets.
The move is expected to impact Uganda’s increasing gold exports, which surged to $2.3 billion last year from $201 million previously.
According to the Bank of Uganda’s June state of the economy report, seen by media on Thursday, “The BoU, in consultation with relevant key stakeholders, has initiated a domestic gold purchase program.” This initiative aims to accumulate foreign currency reserves and address associated risks in international financial markets.
While the report did not specify the exact risks in global financial markets, it highlighted that Uganda’s foreign exchange reserves as of April 30 were approximately $3.5 billion, equivalent to 3.2 months of import cover, down from 3.4 months a year earlier.
Earlier in April, the central bank attributed the decline in foreign exchange reserves to increased external debt repayments and challenges in purchasing foreign currency amidst a devaluation of the local currency.
Uganda has seen a rise in gold production capacity in recent years, with investments from entities like Belgian refiner Alain Goetz establishing processing facilities in the country. Critics have raised concerns that some gold may also originate from eastern Democratic Republic of Congo.
