BoU to purchase locally-produced gold to support foreign reserves

KAMPALA, Uganda | Xinhua | Uganda’s central bank said it is in consultation to begin purchasing locally-produced gold to bolster its foreign reserves and tackle challenges in international financial markets.

The Bank of Uganda (BoU) in its State of the Economy report issued Thursday said the domestic gold purchase program aims at mitigating the declining foreign currency reserves and addressing the associated risks in the international financial markets.

As of April 30, 2024, the country’s reserve stock amounted to about 3.5 billion U.S. dollars or 3.2 months of import cover, slightly lower than the 3.4 months registered in April 2023.

“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 said.

By purchasing gold directly from the artisanal miners, the BoU will also be supporting the livelihoods of artisanal and small-scale miners, and this has positive spill-over effects on other sectors of the economy in line with the Bank’s mission of supporting the government’s socioeconomic transformation, according to the report.

Adam Mugume, an economist and director of research and policy at BoU, told Xinhua that the gold will be purchased from the local miners and processed to at least 99.5 purity levels and then converted into monetary gold.

“This is a consequence of the fact that purchasing foreign currency from the domestic market has been constrained by low foreign currency inflows as a result of dwindling budget support,” Mugume said. ■