Uganda is building up its financial reserves, but the strategy is exposing a bigger question about the country’s economic resilience, can Uganda generate enough foreign currency to make those reserves sustainable?
The Bank of Uganda has begun buying locally produced gold for eventual inclusion in the country’s official reserves, while also using short-term foreign-exchange arrangements to manage liquidity. Together, the measures give the central bank more options, but they do not remove the underlying need for a steady supply of foreign currency.
Uganda’s gross international reserves reached about $6.1 billion at the end of May 2026, equivalent to roughly 2.7 months of imports of goods and services, according to the International Monetary Fund (IMF)’s latest assessment. The increase has been supported by strong capital inflows as well as coffee and gold exports.
That is a significant buffer, but it remains below the IMF’s reserve adequacy benchmark. The Fund’s assessment places the appropriate range for Uganda at about 3.5 to 4.5 months of imports, and has called for reserves to be rebuilt in a sustainable and durable manner.
The question, therefore, is not simply how much money Uganda has in its reserve account. It is whether that buffer can remain strong when the country faces pressure on its foreign-exchange position.
Uganda needs dollars to pay for imports, service external obligations and meet other international payments. At the same time, its foreign-exchange earnings depend on exports, investment, remittances, tourism and other inflows that can fluctuate.
This is where the Bank of Uganda’s use of foreign-exchange swaps and cross-currency repos becomes important.
Between June and October 2025, BoU signed four cross-currency repo agreements worth about $355 million, aimed at replacing $400 million in maturing swaps, according to the IMF.
The attraction is straightforward. Such arrangements give the central bank temporary access to foreign currency and can help it manage liquidity without immediately running down its reserve holdings.
But that is also their limitation. The foreign currency is obtained through a temporary arrangement rather than through a new export receipt or another permanent external inflow. The IMF has warned that foreign-exchange swaps carry rollover risks and the potential for large haircuts, and has advised against expanding the existing stock of swaps.
The distinction matters. Temporary financing can provide breathing room when dollars are scarce, but it does not fundamentally change Uganda’s capacity to earn foreign currency.
That is partly why gold has become important to the reserve strategy.
Under a phased three-year pilot, BoU is purchasing domestically mined gold in Ugandan shillings with the intention of adding refined monetary gold to the country’s reserves. The programme is also intended to formalise parts of the artisanal mining sector through traceability, certification and tighter due diligence.
The IMF says gold bought under the programme must pass origin and purity checks before being refined to monetary-grade gold. BoU is also developing a digital tracing system and working with the Uganda Revenue Authority and the Directorate of Geological Survey and Mines to maintain a chain of custody from the mine to the central bank’s vault.
The attraction of gold is clear. Unlike a foreign-currency deposit, gold is not a claim on another country or institution. It can diversify a reserve portfolio and provide a store of value when financial markets are under pressure.
Uganda is also following a broader African trend. Ghana offers one of the clearest examples. Before its domestic gold purchase programme began in 2021, the Bank of Ghana held about 8.7 tonnes of gold. Sustained purchases pushed its holdings above 40 tonnes by October 2025.
But Ghana’s experience also shows why gold cannot simply replace liquid foreign-exchange assets.
As gold prices rose sharply, gold came to account for about 42 percent of Ghana’s gross international reserves by October 2025. The Bank of Ghana subsequently rebalanced part of its holdings into foreign-exchange assets, saying the move was intended to reduce concentration risk and maintain a reserve portfolio that remained liquid and diversified.
That is an important lesson for Uganda. The issue is not whether gold belongs in the reserves. It is how much gold should be held and how it should be balanced against dollars and other liquid assets.
Gold itself also brings risks. Prices can move sharply, while physical holdings require storage and security. For Uganda, there are additional concerns around the origin of domestically purchased gold, money laundering controls and traceability.
The IMF has specifically flagged risks from gold-price volatility, liquidity constraints, storage security and failures in traceability and Know Your Customer requirements.
There is also a monetary-policy consideration. BoU is buying the gold in shillings, which increases domestic liquidity. Unless that liquidity is properly managed, the programme could complicate monetary policy and create inflationary pressure. The IMF says BoU plans to cap purchases during the pilot and use measures including hedging and a holding period to manage price and liquidity risks.
So gold may strengthen Uganda’s reserve portfolio, but it does not solve the country’s broader foreign-exchange challenge.
That challenge is ultimately about where the dollars come from.
Uganda’s recent reserve accumulation has benefited not only from exports but also from capital inflows, including portfolio investment. The IMF has warned that potential portfolio outflows remain a risk. At the same time, strong domestic investment has increased imports of capital goods, keeping the current-account deficit elevated.
This is why the quality of reserve accumulation matters. A dollar generated through durable export earnings strengthens the external position without creating a corresponding repayment obligation. A temporary swap provides liquidity but also creates an obligation. Gold provides diversification, but it is not immediately equivalent to cash when Uganda needs to pay for imports or meet an external obligation.
The country therefore needs all three, foreign-currency liquidity, diversified reserve assets and stronger sources of foreign-exchange earnings, but they cannot perform the same job.
Uganda has an important opportunity ahead as oil production is expected to begin in late 2026. The IMF projects oil revenue to rise to about 1.2 percent of GDP in FY2026/27, providing another potential source of foreign exchange.
But oil should not obscure the broader challenge. Coffee, gold, tourism, remittances, investment and other exports will remain important to Uganda’s external position. The more diversified those sources of foreign exchange become, the less dependent the country will be on temporary financing when dollar liquidity tightens.
That is ultimately what makes the IMF’s warning significant. It is not an argument against Uganda buying gold. Nor is it necessarily an argument against using swaps or repos when market conditions require them. The IMF itself recognises that the gold programme could support reserve accumulation, provided its financial and operational risks are properly managed.
The concern is what happens if temporary instruments become a recurring substitute for sustainable foreign-exchange earnings. Uganda can use swaps to manage a shortage. It can hold gold to diversify its reserves. It can look to oil to generate new foreign-exchange earnings. But none of these changes the fundamental requirement for an economy that consistently earns enough foreign currency to meet its external obligations and build buffers against future shocks.
That is the bigger test for Uganda’s reserve strategy. The success of the policy will not ultimately be measured by how much gold sits in the central bank’s vaults, or how much foreign currency BoU can access when markets tighten.
The real test is whether Uganda can build an economy that generates enough dollars that it does not have to keep finding temporary ways to secure them.
