Uganda’s central bank has announced plans to initiate the purchase of locally-produced gold in a bid to strengthen its foreign reserves and navigate the challenges posed by international financial markets. This strategic move, outlined in the Bank of Uganda’s (BoU) State of the Economy report released on Thursday, aims to address the nation’s declining foreign currency reserves and mitigate associated risks.
As of 30 April 2024, Uganda’s reserve stock stood at approximately 3.5 billion USD, equating to 3.2 months of import cover. This marks a slight decrease from the 3.4 months of import cover recorded in April 2023.
The domestic gold purchase programme is anticipated to complement the government’s ongoing efforts to add value to the country’s mineral resources and support the Import Substitution Strategy, which seeks to reduce the reliance on imported raw gold. By sourcing gold directly from artisanal miners, the BoU aims to bolster their livelihoods, thereby generating positive ripple effects across various sectors of the economy. This aligns with the central bank’s mission to contribute to the government’s broader socioeconomic transformation agenda.
Adam Mugume, the BoU’s Director of Research and Policy, elaborated on the initiative in an interview with Xinhua. He stated that the gold acquired from local miners would be refined to a purity level of at least 99.5%, subsequently converting it into monetary gold. Mugume noted that this measure comes in response to constrained foreign currency purchases from the domestic market, which have been impacted by diminishing foreign currency inflows due to reduced budget support.
“This initiative is also expected to support the government’s ongoing value addition to the minerals and Import Substitution Strategy by reducing the imports of raw gold into the country,” the central bank remarked in its report.
By engaging directly with artisanal and small-scale miners, the BoU is not only securing a vital economic resource but also fostering economic stability and resilience in the face of global financial uncertainties. This strategic approach underscores Uganda’s commitment to leveraging its domestic resources to fortify its economic standing and ensure sustainable growth.
