Domestic Gold Purchase Programme: A Bold Gamble for Uganda’s Economic Stability
By Engr Olanya Olenge Tonny, Team Lead, Global Gold Consortium, Uganda
The Bank of Uganda’s newly launched Domestic Gold Purchase Programme represents one of the most significant shifts in the country’s economic strategy in recent decades. By positioning itself as a direct buyer of domestically refined gold, the central bank is attempting to achieve what no Ugandan institution has successfully done before: simultaneously stabilize the currency, formalize the artisanal mining sector, and reduce reliance on foreign paper assets.
Between November 2024 and October 2025, Uganda’s gold exports generated approximately $5.21 billion (UGX 18.23 trillion), cementing gold as a leading export earner. Yet historically, much of this value has been lost to opaque supply chains and exploitative middlemen. The central bank’s intervention, backed by an initial injection of UGX 592 billion (about $160 million), aims to change that calculus.
A Global Trend with a Local Twist
Globally, central banks are increasing gold holdings. According to the World Gold Council, purchases have reached record highs driven by inflation concerns, geopolitical tensions, and currency volatility. China, Russia, and Turkey have aggressively expanded gold reserves as part of a broader de-dollarization strategy.
Uganda’s approach mirrors this trend but with a distinctive difference: sourcing gold domestically rather than on international markets. The dual benefit—reserve accumulation and domestic economic stimulation—is politically attractive, but economically complex.
Industrialization or Distortion?
With only a handful of licensed refineries, including Eurogold Refinery and Feldstein Refinery, designated as primary procurement partners, the programme guarantees demand and reduces market risk for investors. This could attract capital into refining, certification, and equipment manufacturing.
However, critical policy questions remain unanswered:
· Will the central bank’s dominant buying position crowd out private sector competition?
· Could price distortions emerge if the Bank offers above-market rates?
· How will regulatory oversight keep pace with rapid expansion in an historically informal sector?
South Africa’s experience offers a cautionary comparison. The South African Reserve Bank has largely avoided direct market participation, instead fostering a robust private mining ecosystem supported by strong regulatory institutions. Uganda is attempting to build both the market and the institutions simultaneously—a far more delicate balancing act.
Monetary Policy Implications
From a monetary perspective, gold carries no default risk and tends to appreciate during global uncertainty, offering a natural hedge against external shocks. Theoretically, this could enhance Uganda’s sovereign credit profile with agencies like Moody’s and Fitch Ratings, who assess both the quantity and quality of reserves.
Yet gold is a non-yielding asset. Unlike bonds, it generates no interest income—an opportunity cost for a developing economy with significant fiscal needs. Additionally, gold prices, while stable over the long term, can be volatile in the short term.
Formalizing the Artisanal Sector
Perhaps the most transformative potential lies in restructuring Uganda’s artisanal and small-scale mining (ASM) sector, which supports millions of livelihoods but remains largely unregulated. By requiring licensed and traceable sources, the Bank of Uganda is forcing formalization, aligning with the Mining and Minerals Act, 2022.
A guaranteed buyer directly addresses exploitation by middlemen, potentially improving income stability for miners. Emerging initiatives like gold-backed financing, championed by Light Moon Group, offer pathways to credit access using gold as collateral.
But formalization brings burdens: compliance with licensing, environmental standards, and taxation may be overwhelming for small-scale operators without adequate training and infrastructure support.
Governance: The Decisive Factor
Natural resource governance in Africa has often been undermined by weak institutions and elite capture. The involvement of entities like the Uganda National Mining Company and proposals for a regional metals exchange signal ambition, but transparency and accountability will determine success or failure.
The Extractive Industries Transparency Initiative (EITI) provides a useful benchmark. Uganda’s alignment with such frameworks will be critical to avoid repeating past mistakes.
Continental Stakes
Africa accounts for a significant share of global gold production but captures only a fraction of the value due to limited refining capacity and reliance on external certification systems in Dubai or London. Efforts to establish an African-led gold certification and trading system could shift this dynamic, with Uganda’s experience serving as a test case.
Conclusion
Uganda’s Domestic Gold Purchase Programme is a bold policy experiment. Its success will hinge on execution—on the ability of institutions to manage complexity, enforce standards, and adapt to evolving market conditions. It requires sustained investment not only in infrastructure but also in governance, human capital, and technological innovation.
If managed well, Uganda could emerge as a model for resource-driven economic transformation. If mismanaged, the initiative risks becoming another chapter in the long history of underperforming extractive industries.
The stakes are not just economic. They are structural—and generational.
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