East African central banks are increasingly turning to gold as a strategic component of their foreign exchange (FX) reserves, joining a growing global shift toward buffering against external shocks and reducing overreliance on the U.S dollar.
The trend comes amid rising geopolitical tensions, persistent currency volatility, and the need to shield domestic economies from disruptions caused by crises such as the ongoing Middle East conflict, the Russia-Ukraine war, and lingering effects of the COVID-19 pandemic.
Across the region, countries are enhancing their FX reserves to protect their currencies and stabilise markets. On June 19, 2025, Kenya’s usable FX reserves stood at US $ 10.9 billion, equivalent to 4.8 months of import cover, supporting a modest year-on-year USD/KES depreciation of just +0.43%. Tanzania reported US $ 5.3 billion in reserves, covering 4.3 months of projected imports and maintaining a similarly low 0.64% depreciation of the Tanzanian shilling.
Uganda, despite having a lower import cover of 3.3 months, recorded a surprising 3.66% year-on-year appreciation of the Ugandan shilling with reserves totaling US $ 3.8 billion in April. In contrast, the Democratic Republic of Congo (DRC) remains exposed, with only 2.6 months of import cover and reserves US $ 6.7 billion, leading to a 1.51% depreciation in the Congolese franc.
The global benchmark for FX reserves is three months of import cover, but many countries set higher thresholds. Kenya targets four months, while the East African Community (EAC) sets a macroeconomic convergence threshold of 4.5 months. The South African Development Community (SADC) has an even more ambitious target of six months. Oil and commodity-dependent economies often aim for seven months of cover due to higher exposure to external price shocks.
As traditional FX reserve currencies come under pressure, gold is emerging as a favored alternative. The World Gold Council reported net central bank gold purchases of 244 tons in Q1 2025, with projections of up to 1000 tons for the full year. Countries are turning to gold not only for diversification but as a hedge against inflation, currency devaluation, and financial sanctions. Gold is perceived as a “safe haven” asset that appreciates during crises, enhances investor confidence, and supports monetary policy flexibility.
Within East Africa, several central banks are actively building their gold reserves. The Bank of Tanzania has partnered with local miners such as Geita Gold Mine, Shanta, Buckreef, and GGR to purchase 20% of their output, acquiring 5 tons worth US $ 554.28 million by June 13, 2025.
The Bank of Uganda launched a domestic gold purchase program in 2024 targeting artisanal miners in Karamoja, and Rwanda’s central bank is set to begin gold acquisitions in July 2025. Kenya’s Central Bank is also “actively considering”, according to news reports, entering the gold market to diversify its FX reserves and strengthen macroeconomic stability.
Globally, the U.S continues to dominate FX reserves with the dollar accounting for 57.8% of the total- equivalent to US $ 6.6 trillion as of Q4 2024- though this marks a decline from a peak of 72.7% in 2002. The euro follows at 19.8%, down from 21.3%, while the Japanese yen and British pound have slightly increased to 5.8% and 4.7% respectively. The Chinese yuan now holds a 21.7% share. The gradual decline in dollar dominance is driven by a wave of “de-dollarization,” as many countries seek to reduce exposure to U.S monetary policy shifts and safe-haven capital flows that strengthen the dollar during global turmoil.
Gold’s strategic appeal lies not only in its long-term value- having surged 9283% since January 1960 to USD 3309.49 per troy ounce as of May 2025, but also in its utility as a policy tool. It can be sold to inject liquidity into the economy or bought to tighten money supply. A buildup of gold reserves is seen as a signal of economic prudence, while a reduction may indicate an urgent need for foreign currency liquidity.
While East Africa is still a minor player in terms of gold holdings compared to global heavyweights like the U.S (8133.46 tons) and Germany (3351.53 tons), efforts are underway to build reserves. Among African countries, Algeria leads with 173.56 tons, followed by Libya, Egypt, Ghana, and Mauritius. Kenya currently holds only 0.02 tons but is poised to increase its gold footprint as part of a broader strategy to fortify its financial defenses.
This pivot to gold is not just about reserves- it’s about resilience. As economic uncertainty continues to define the global landscape, East Africa’s move toward gold marks a proactive step in reinforcing economic sovereignty and reducing vulnerability to global financial stocks.
