East African countries are gradually shifting their foreign exchange (FX) reserve strategies by adding more gold, a move aimed at reducing dependence on the U.S. dollar and protecting their economies from rising global uncertainties. This trend mirrors a global pivot toward gold as central banks brace for inflationary pressures, geopolitical tension, and currency instability.
This new strategy is driven by the need to build economic resilience in the face of global shocks such as the ongoing Middle East conflict, the war in Ukraine, and the lingering effects of the COVID-19 pandemic. By increasing their gold holdings, central banks in the region are hoping to strengthen their currencies and enhance confidence in monetary policy.
Kenya, Tanzania, Uganda, and Rwanda are among the East African nations either accumulating gold or actively considering gold purchases to bolster their foreign reserves. The shift comes at a time when the traditional dominance of the U.S. dollar is slowly weakening, with global central banks seeking alternative reserve assets to diversify their portfolios.
As of June 19, 2025, Kenya’s FX reserves stood at $10.9 billion, equivalent to 4.8 months of import cover. This has supported a relatively stable exchange rate, with only a modest 0.43% depreciation in the USD/KES rate over the past year. Tanzania also reported reserves of $5.3 billion, covering 4.3 months of imports and maintaining a low depreciation rate of 0.64% for the Tanzanian shilling.
Uganda’s case is even more notable. With reserves totaling $3.8 billion and an import cover of 3.3 months, the country’s shilling appreciated by 3.66% year-on-year. Meanwhile, the Democratic Republic of Congo (DRC) has reserves of $6.7 billion, but with just 2.6 months of import cover, its currency depreciated by 1.51%.
These reserve levels are closely monitored as they reflect the financial health and stability of an economy. The East African Community (EAC) has set a convergence target of 4.5 months of import cover, while the Southern African Development Community (SADC) recommends six months. Kenya’s target is four months, in line with its regional commitments.
As global currencies face volatility, gold is being seen as a more stable reserve asset. According to the World Gold Council, central banks worldwide purchased 244 tons of gold in the first quarter of 2025 and are projected to reach 1,000 tons by the end of the year. These purchases are part of a broader effort to hedge against inflation, avoid currency devaluation, and reduce exposure to financial sanctions.
Tanzania is among the regional leaders in this gold push. The Bank of Tanzania has partnered with several local mining companies such as Geita Gold Mine, Shanta, Buckreef, and GGR to buy 20% of their gold output. By June 13, 2025, Tanzania had acquired five tons of gold worth $554.28 million under this initiative.
Uganda’s central bank launched its gold purchase program in 2024. It focuses on engaging artisanal miners in the Karamoja region to tap into locally sourced gold. Rwanda is also set to begin its own central bank-backed gold acquisitions starting July 2025. Kenya, while still holding just 0.02 tons of gold, is actively reviewing its strategy to enter the gold market to improve its FX reserve mix and overall economic stability.
Globally, the U.S. dollar still dominates FX reserves, accounting for 57.8% or $6.6 trillion as of Q4 2024. However, this marks a steady decline from 72.7% in 2002. The euro holds a 19.8% share, while the Japanese yen and British pound stand at 5.8% and 4.7% respectively. The Chinese yuan now accounts for 21.7%, reflecting ongoing diversification by central banks worldwide.
Gold’s appeal lies not just in its long-term price increase — rising 9,283% since 1960 to $3,309.49 per troy ounce as of May 2025 — but also in its practical utility. Central banks can sell gold to inject liquidity or buy it to tighten money supply. The presence of gold in FX reserves sends a strong signal of economic discipline and helps boost investor confidence.
East Africa’s efforts may still be small compared to global gold leaders. The U.S. holds the largest reserves at 8,133.46 tons, followed by Germany with 3,351.53 tons. Among African nations, Algeria leads with 173.56 tons, followed by Libya, Egypt, Ghana, and Mauritius.
Although Kenya and its East African peers currently lag in gold holdings, the growing interest in gold reflects a proactive shift in monetary policy thinking. It’s no longer just about meeting short-term reserve targets but about building a long-term buffer that enhances stability, improves flexibility in policy implementation, and reduces vulnerability to global financial fluctuations.
In a world of unpredictable markets and shifting geopolitical alliances, the decision to hold more gold is seen by economists and central bankers as both a shield and a signal — a way to protect national economies and to show that the region is serious about financial sovereignty.
