Central Bank Plans Gold Purchases to Diversify Foreign Exchange Reserves
By Chemtai Kirui
Nairobi, Feb 11 — The Central Bank plans to begin purchasing gold as part of a strategy to diversify its foreign exchange reserves and strengthen financial buffers against economic shocks, officials said on Wednesday.
Governor Kamau Thugge said the institution is considering adding gold to its holdings as an “extra buffer” alongside traditional reserve assets such as hard currencies and sovereign securities.
The announcement followed a Monetary Policy Committee meeting where the central bank also reduced its benchmark lending rate by 25 basis points to 8.75 per cent, aiming to support credit growth.
“As of today, we anticipate going into the purchase of gold as an extra buffer. It is one of the ways of diversifying our holdings of reserves,” Thugge told reporters, without specifying when or how much gold might be acquired.
Foreign exchange reserves, assets held to support the Kenya shilling, finance essential imports and meet debt obligations, stood at roughly KSh1.6 trillion, as of Feb. 9, data published by the central bank show.
That level provides more than five months of import cover, well above the statutory minimum the bank aims to maintain.
Diversification of reserves is seen as a tool to reduce the risk that comes with holding large amounts of a single currency, such as the U.S. dollar or euro.
Gold, while not yielding interest like government bonds, is globally considered a store of value in times of market stress or currency volatility.
Several other African central banks, including those in the Democratic Republic of Congo, Rwanda and Namibia, have already incorporated gold into their reserve portfolios as part of similar diversification strategies.
Economists said that while gold can offer a hedge against currency swings and global financial uncertainty, its price can be volatile. Whether gold improves the resilience of reserves depends on how purchases are timed and integrated with other reserve assets.
“The potential move into gold should be gradual and measured so that liquidity is not compromised,” said an economist at a Nairobi financial think tank. “Gold can add strategic value, but if held in excessive proportions relative to other assets, it can reduce flexibility when quick access to foreign exchange is needed.”
Reserve diversification comes as the Central Bank continues with an accommodative monetary stance. Tuesday’s rate cut was the 10th consecutive reduction since August 2024, reflecting sustained moderations in inflation and a policy focus on stimulating private sector lending, central bank releases show.
Thugge also addressed speculation about the future of the shilling, dismissing market talk that the currency could weaken sharply against the U.S. dollar.
He mentioned steady capital inflows, diaspora remittances and strong reserve cover as key supports for the unit’s relative stability, though he acknowledged that external pressures remain a factor for policymakers to monitor.
