Kenya has followed Ghana’s example and joined the growing trend of African central banks purchasing gold to boost their reserves and reduce overreliance on foreign exchange, as well as the free fall of local currencies.
Former Vice President Dr Mahamudu Bawumia first proposed the idea for Ghana and three years ago, the government announced that the Bank of Ghana would begin buying gold to build the nation’s reserves.
The initiative was aimed at reducing dependence on foreign exchange, stabilising fuel prices, strengthening the cedi and supporting overall economic growth.
Ghana’s gold reserves have since grown significantly from a mere seven tonnes at the start of the programme to over 30 tonnes currently with several African countries now emulating Ghana’s success story.
The latest country to do so is Kenya, which plans to buy gold to diversify its reserves.
The Central Bank of Kenya (CBK) has already held talks with the Bank of England on matters including bullion storage.
According to several reports, including one by Bloomberg, Kenya’s Central Bank Governor, Kamau Thugge, said the plan to incorporate gold into the country’s reserves is aimed at diversifying Kenya’s foreign assets and helping to stabilise the local currency, the Kenyan shilling.
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The report noted that the strategy is also part of Kenya’s broader effort to reduce reliance on the US dollar and promote long-term economic stability.
Kenya is optimistic about improving its gold reserves, much like Ghana has done, and has held discussions with the Bank of England on providing storage facilities.
“We have talked to the Bank of England and other banks to see how we go about it where it will be stored, those kinds of things,” Central Bank Governor Kamau Thugge said in an interview in Washington.
“I’m hoping that we can do it as soon as is practical because we’re ready to move.”
Given the rapid rise in gold prices this year, Kenya hopes to benefit from the opportunity, even though it is joining the effort relatively late.
“Those who got in early have made a killing,” Thugge remarked.
“Those who get in late can also be killed. So, it’s important that we hold a level where, should there be a reversal in the price of gold, it doesn’t really have a huge impact on our holdings,” he added.
Other African countries that have followed Ghana’s lead include Zambia, Uganda, and Rwanda, with many others including Nigeria, expected to adopt similar policies, especially after the African Development Bank (AfDB) recommended the gold-buying strategy to African nations earlier this year.
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