Uganda's central bank begins buying gold locally to diversify its foreign reserves.

The Ugandan central bank has begun purchasing gold from local producers as part of a new strategy to diversify its reserves.

Bank of Uganda confirmed its first purchase, although it did not disclose the value or volume of gold acquired, according to Business Insider.

The three-year pilot program aims to reduce reliance on traditional reserve assets and enhance financial flexibility.

Diversifying reserves through gold accumulation

Uganda thus joins a growing number of African central banks, including those in Kenya and the Democratic Republic of Congo, that have recently indicated or begun efforts to diversify reserves through gold accumulation.

According to the Central Bank of Uganda, this initiative aims to diversify the components of its reserve assets and reduce reliance on traditional instruments such as foreign currencies and government bonds.

The bank explained that the program aims to enhance the adequacy of reserves and reduce exposure to external market fluctuations.

Uganda has emerged in recent years as a major regional hub for gold manufacturing and trading. Official data indicates that the country exported US$5.8 billion worth of gold last year, an increase of 761 TP3T over the previous year.

Currency fluctuations and commodity market shifts

However, domestic production in Uganda still relies heavily on small-scale and informal miners, reflecting the fragmented structure of the sector.

This move comes as central banks worldwide are increasingly reassessing reserve composition amid currency volatility and shifts in commodity markets, with gold often seen as a hedge against inflation and external shocks.

But this move could significantly reduce Uganda's growing gold exports, which brought in $2.3 billion last year from $201 million the previous year.

Uganda’s gold production capacity has increased in recent years as several investors, including Belgian refiner Alain Goetz, have set up processing facilities in the country, although critics have said some gold may also be flowing in from the east of the Democratic Republic of Congo.