Bank of Uganda to buy gold locally to boost foreign reserves

The Bank of Uganda (BoU) has embarked on plans to directly purchase gold from local artisanal miners.

Dubbed ‘Domestic Gold Purchase Programme’ BoU said the main objective is to build the country’s foreign reserves and minimize risks on reserves investments.

“The gold purchase programme will help in accumulating foreign currency reserves and address the associated risks in the international financial markets,” the Central Bank said.

It is also expected that the programme will support the government’s ongoing value addition to minerals and the Import Substitution Strategy by reducing the imports of raw gold into the country.

By purchasing gold directly from the artisanal miners, the BoU said it 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 to support socio-economic transformation,” BoU said.

This is contained in the Bank’s State of the Economy report for June 2024 released on Wednesday.

Recently, Bank of Uganda said the country’s foreign exchange reserves had fallen due to rising external debt repayments and the central bank’s inability to buy foreign currency due to a slide in the local currency.

The bank said in its June report that Uganda’s foreign exchange reserves stood at about $3.5 billion as at April 30, equivalent to 3.2 months of import cover, down from 3.4 months a year earlier.

This comes as the government said it will issue Shs7.8 trillion in treasury bonds to offset the debt it owes Bank of Uganda. The debt had accumulated to Shs7. 8 trillion with the government over the years. In FY2022/23, the Auditor General revealed that Bank of Uganda (BOU) penalized Government to the tune of sh405.049b for failing to meet its contractual debt obligations.