Bank of Uganda (BOU) has made its first public announcement on its plan to buy gold from the local market, a move that is set to introduce the most credible client for artisanal miners in Uganda.
According to the State of the Economy for June 2024, a report that Bank of Uganda released on July 10, the central bank noted that it had decided to buy gold from the local market to beef up its foreign reserves.
“The BOU, in consultation with relevant key stakeholders, has initiated a Domestic Gold Purchase Program with the objectives of building the country’s foreign reserves and minimizing risks on reserves investments,” the report notes. The report added: “The gold purchase program will help in accumulating foreign currency reserves and address the associated risks in the international financial markets.”
In our online magazine, the Deep Earth wrapper for March 2024, we revealed that the central bank was undertaking studies on how to purchase gold from both local artisanal miners and some refining companies.
This will not be the first time that BOU will be buying gold from the local market. More than 30 years ago, just before the liberalisation of Uganda’s economy, BOU had a small desk within its operational structure that purchased gold from the public.
At the time, a statutory instrument gave BOU the authority to be the only buyer of gold in the country. The instrument went as far as empowering BOU to fix gold prices.
That is no longer the case. The gold desk was disbanded, and Uganda now runs a liberalised economy that allows the market to set prices at free will.
The decision by the Central Bank to buy gold from the local market is set to offer more credibility to an industry that has struggled to shake off the public suspicion of the trades in the sector. A lot of that suspicion is based on widespread accusation of smuggling in the gold industry, with large stocks estimated to emerge out of neighbouring countries.
According to the state of the economy report, “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 to support socio-economic transformation.”
It appears Bank of Uganda is also trying to limit the amount of gold coming into Uganda. The report points out that: “The program 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.”
It is not clear how much gold the Central Bank intends to buy from the local market, or even at what price. There is no publicly available data on how much gold is mined in Uganda as imported stocks are easily blended into the local market.
Gold is listed as Uganda’s largest export. The mineral fetched Uganda more than $2 billion in export value in 2022, the highest amount to ever be recorded from a single item.