Uganda has joined a growing list of African countries turning to gold to support their currencies.
The Bank of Uganda will directly purchase gold from artisanal miners in an effort to support local miners further and reduce the importation of raw gold.
The Bank of Uganda said in a report posted on its website that by purchasing domestic supplies of the precious metal, Uganda will bolster its foreign exchange reserves and reduce risks associated with traditional reserve investments.
"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."
Uganda's Central Bank said in a report posted on its website that by purchasing domestic supplies of the precious metal, Uganda will bolster its foreign exchange reserves and reduce risks associated with traditional reserve investments.
Zimbabwe was the first African country to launch a new "structured currency" backed by gold following the central bank's plan to tackle sky-high inflation and stabilise the country's long-floundering economy.
In April, the South African nation launched its ZiG currency - short for Zimbabwe Gold - backed by 2.5 tons of the precious metal.
Since then, several other African countries have flirted with the idea of launching a new "structured currency" backed by gold.
Ghana, Africa's second-largest bullion producer, recently informed big miners to sell 20% of what they refine to the central bank.
Notably, the Central Bank of Nigeria has also announced plans to purchase all locally produced gold in an effort to shore up reserves and combat inflation.
According to Bloomberg, these developments arose as African nations continue to find ways to grapple with heavy debt levels, high interest rates, and economic setbacks resulting from the COVID-19 pandemic and subsequent inflation, exacerbated by global geopolitical events such as Russia's invasion of Ukraine.
Comments