Uganda Turns to Gold to Bolster Currency and Support Local Miners
Uganda has joined a growing list of African countries turning to gold to support their currencies. The Bank of Uganda (BOU) will directly purchase gold from artisanal miners to support local miners and reduce the importation of raw gold.
According to a report posted on its website, the BOU stated that by purchasing domestic gold supplies, Uganda will strengthen its foreign exchange reserves and mitigate risks associated with traditional reserve investments.
The BOU emphasized, “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.”
Zimbabwe was the first African country to introduce a new “structured currency” backed by gold. In April, Zimbabwe launched its ZiG currency – short for Zimbabwe Gold – supported by 2.5 tons of the precious metal, as part of the central bank’s plan to tackle high inflation and stabilize the country’s struggling economy.
Following Zimbabwe’s lead, several other African countries have considered launching their own gold-backed currencies. Ghana, Africa’s second-largest gold producer, recently instructed large miners to sell 20% of their refined gold to the central bank. Similarly, the Central Bank of Nigeria announced plans to purchase all locally produced gold to boost reserves and combat inflation.
These initiatives come as African nations seek solutions to heavy debt burdens, high interest rates, and economic setbacks resulting from the COVID-19 pandemic and subsequent inflation. Global geopolitical events, such as Russia’s invasion of Ukraine, have further exacerbated these challenges .
