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 – Uganda’s central bank has begun buying locally-produced gold to bolster its depleted foreign reserves and tackle emerging challenges in international financial markets.

The move could lower the country’s growing gold exports, whose shipments brought in $2.3 billion last year from $201 million in the previous year.

“The BoU (Bank of Uganda), in consultation with relevant key stakeholders, has initiated a domestic gold purchase program,” the bank said in its June state of the economy report seen by Reuters on Thursday.

“The gold purchase program will help in accumulating foreign currency reserves and address the associated risks in the international financial markets.”

BoU did not specify the risks in international financial markets it was referring to.

The bank said in its June report that Uganda’s foreign exchange reserves stood at about $3.5 billion as at April 30, equivalent to 3.2 months of import cover, down from 3.4 months a year earlier.

In April the central bank said the country’s foreign exchange reserves had fallen due to rising external debt repayments and the central bank’s inability to buy foreign currency due to a slide in the local currency.

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