The price of gold has experienced a rapid increase over the past few weeks, compelling markets globally, including those in Africa, to adjust their responses.
Additionally, responses across Africa have been influenced by the quantum of gold held in reserves and the subsequent impact on a nation’s fiscal policy goals.
An example of this played out in Ghana a couple of weeks ago, where the central bank of the West African nation elected to divest a considerable segment of its gold reserves, notwithstanding the surge in gold’s value.
This decision was due to the disproportionately high representation of gold within its international reserves.
In contrast, very recently, in the Eastern part of the continent, Kenya has gone the opposite direction, opting instead to look into purchasing more gold.
As seen on Reuters, the governor of the Kenyan Central Bank, Kamau Thugge, is contemplating the diversification of the country’s reserves using gold.
“We anticipate going into the purchase of gold as an extra buffer.
This is something that we have indicated before, it is one of the ways of diversifying our holding of reserves,” the Governor disclosed to the media.
Should the idea materialize, Kenya would become one of the countries, alongside Rwanda, Namibia, and the Democratic Republic of the Congo, that are increasing their gold reserves.
The revelation from the central bank governor came a day after the apex Bank lowered its benchmark lending rate by 25 basis points to 8.75% in an effort to boost credit expansion.
According to central bank figures published Wednesday, Kenya’s foreign exchange reserves as of February 9 were $12.46 billion, or 5.4 months’ worth of import cover.
Ghana’s gold sale
In the last week of January, the Bank of Ghana (BoG) decided to reduce the proportion of gold held in its international reserves by 51% (18.6 tonnes).
The bank noted that this move was the result of gold’s disproportionately high presence in its international reserves, as well as a shift toward amassing more foreign-currency assets.
Prior to this adjustment, gold accounted for 40% of the West African nation’s reserves, much surpassing the usual average range of 20% to 25%.
“At the time, we were holding a little over 40 per cent, so the decision was made to diversify, and that is what you see,” he said at the 128th Monetary Policy Committee press briefing in Accra,” Dr. Johnson P. Asiama, the Governor of the bank, stated.
“The effects that were aimed at are there. It is earning dividends and contributing to reserve accumulation,” he added.
