The Central Bank of Uganda (BOU) has shed more light on its newest strategy to boost foreign currency reserves, including the planned purchase of gold from local miners as a way to reduce dependency on traditional assets.
According to the Deputy Governor BOU, Michael Atingi-Ego, the move comes in light of several operational challenges the Central Bank is currently facing, given the increased diversity, frequency and industrial shocks, which have adversely affected fulfillment of the entity’s mandate.
In an interview with British Broadcasting Corporation BBC, Mr Atingi said the shocks highlighted above had resulted into serious challenges like; dwindling down of the country’s reserves because of a huge build up of external debts that also need servicing, a sharp rise in imports of goods and services, a substantial drop in capital inflows, and significant pressures on foreign exchange rates.
“In light of the above, BOU opted to ensure they hold the decline in foreign exchange reserves by looking at some of the country’s natural resources in order to mitigate this decline. One of these, is gold” -Fmr Ating said.
Export statistics show that gold has emerged as Uganda ‘s largest export commodity surpassing tourism and coffee but also the move will support local miners, and minimize BOU’s importation of raw gold into Uganda.
Mr Atingi said the purchase of gold will be done locally from artisanal gold miners, and BOU will offer them a fair price for their products using local currency. This strategy, he says, will boost Uganda ‘s foreign exchange reserves by diversifying the Central Bank’s investment portfolio away from currency reserves to non-currency reserves.
He however said the pricing of gold purchases will be determined depending on the purity of gold supplied, which will also depend on the quantity and dates of delivery but also prices from international trading platforms like Bloomberg.
