Uganda's Central Bank Boosts Foreign Reserves with Domestic Gold Purchases

Uganda's central bank has initiated a domestic gold purchase program to enhance its foreign reserves and address challenges in international financial markets. This move comes as Uganda's gold exports surged to $2.3 billion last year. The bank aims to counter diminishing reserves and increase foreign currency holdings.

Uganda's central bank has started a program to buy locally-produced gold in a bid to strengthen its dwindling foreign reserves and navigate emerging issues in the global financial market. This new strategy comes at a time when the country's gold exports jumped dramatically, fetching $2.3 billion last year as compared to $201 million the year prior.

The Bank of Uganda (BoU) announced its domestic gold purchase initiative in its June economy report acquired by Reuters. According to the report, the program is designed to build up foreign currency reserves and mitigate risks associated with international financial markets. The specific risks were not disclosed by the BoU.

As of April 30, Uganda's foreign exchange reserves were approximately $3.5 billion—covering 3.2 months of import needs, down from 3.4 months the previous year. The bank cited increased external debt repayments and a weakened local currency as primary reasons for the drop in reserves. The country's gold production has notably increased with investments from various international players, despite concerns that some of this gold might be sourced illegally from the eastern Democratic Republic of Congo.

(With inputs from agencies.)