East African Central Banks Seek Domestic Gold Buys Amid Global Risks

Regional central banks in East Africa are calling for increased domestic gold purchases to diversify their reserves and reduce reliance on foreign currencies, particularly the US dollar. The request comes amid rising global risks due to ongoing conflicts in the Middle East, including the US-Iran war in the Strait of Hormuz.

The 29th Ordinary Meeting by the East African Community (EAC) central banks under the Monetary Affairs Committee noted that current reserves are dominated by foreign exchange. To build resilience and diversify sources of international reserves, the committee recommended domestic gold purchases and attracting remittances.

Kenya currently leads the region with 0.02 tonnes of gold reserves as of December last year, a holding that has been consistent over the past two decades. The country's foreign exchange reserves declined to $13.85 billion in February, equivalent to 5.6 months of import cover but still above the statutory requirement.

The EAC region is expected to grow by 5.2% this year despite global risks and higher food prices. Regional currencies are anticipated to remain stable due to diversified foreign exchange inflows and domestic market reforms.