Kenya is set to acquire more gold to diversify its foreign exchange holdings beyond the dollar and other currencies, Central Bank of Kenya Governor Kamau Thugge has revealed.
While speaking to Bloomberg, Thugge revealed the CBK is actively considering adding more gold to its reserves amidst reports of current reserves dwindling. However, Thugge did not disclose the timeline of this endeavour.
“We have basically a group that is looking at the feasibility of doing it and yes, that’s something that we’re actively considering,” Kamau Thugge noted on the sidelines of the International Monetary Fund and World Bank Spring Meetings.
Kenya held gold valued at Ksh169 million ($1.3 million) by end-June, according to the most recent central bank annual report. It owns 600 ounces (close to 20 kilograms) after selling most of its holdings in 1998, according to the IMF.
Central banks and investors around the world are stockpiling gold, pushing prices to a record. The precious metal’s run began in early 2024, aided by central banks diversifying holdings to hedge against the dollar and insulate themselves from the threat of sanctions. More recently, countries have increasingly engaged in gold-funded trade.
Currently, the global price of an ounce of gold is $3,302 (Ksh428,467), a surge of over 40 per cent. Gold has emerged as the best-performing major commodity this year, driven by geopolitical tensions, economic uncertainty, and strong demand from central banks worldwide.
The seemingly low gold reserves contrast with the massive dollar reserves that the country holds. Kenya's total foreign exchange reserves were reported at $9.6 billion (Ksh 1.2T) in November 2024. This means that gold constitutes less than 0.016 percent of the country's total reserves.
This heavy reliance on a single currency exposes the country to potential risks associated with currency fluctuations, a scenario that Kenya is seeking to avoid.
Meanwhile, Thugge also announced that the new International Monetary Fund (IMF) loan Kenya will receive towards the end of the year will be the same as the previous one.
“The concessional element of the funds and the policy package attached to them makes it a good package in the current context of elevated global risks,” stated Thugge.
Thugge further added that the IMF program and a Eurobond issued last month will enable the country to avoid borrowing more loans anytime soon.
“The nation isn’t planning or expecting to go to the international capital markets for a while, following a Eurobond issue last month that helped it rearrange some debt,” he said.
“Kenya has a deep local financial market that can help finance its budget and is also looking to others, such as the Middle East, for loans,” the governor added.
