Experts weigh in on Rwanda’s plan to add gold to foreign reserves

The government plans to start buying gold for its international reserves for the financial year that starts in July, following approval from the board of the central bank, officials have said. The development, according to the central bank, is part of efforts to boost the country’s foreign exchange reserves in face of growing global uncertainty. ALSO READ: Economy remains resilient despite global uncertainties While the central bank didn’t disclose acquisition volumes and expected returns, it noted that a survey conducted assessing gold’s viability as a reserve asset highlighted its role in countering external shocks, its liquidity, and its potential to preserve capital in times of market stress. ALSO READ: Rwanda to add gold to foreign reserves portfolio in next financial year Kevin Karobia, Senior Investment Analyst at BK Capital, believes that Gold has been regarded as a safe-haven asset during global uncertainty, and that 2025 has been no exception. He argues that amid ongoing uncertainty and market volatility, gold prices have surged over 23 percent year-to-date, reaffirming their role as a store of value in times of distress. “In our context, it is unsurprising that countries like Rwanda are exploring gold as part of their reserve diversification strategies. Gold offers several economic and financial advantages, such as diversification benefits given the historically low or negative correlation to traditional assets like stocks and bonds.” ALSO READ: Central Bank explains decision to hold interest rate steady He added, “Gold enhances portfolio diversification. When risk assets underperform, gold often delivers positive returns.” Karobia maintained that Gold also provides a hedge against currency depreciation and inflation through preserving purchasing power in times of domestic currency weakness or elevated inflation, citing both as key risks for frontier and emerging markets. He shared similar sentiments with Jean Bosco Kalisa, an economist based in Kigali, who also doubles as the Vice President at the Rwanda Council of SMEs. Kalisa reflected on the current global and regional economic and political environment, surrounded by lingering effects of the COVID-19 pandemic, global tensions, as well as inflation rates. He argued that economies are experiencing high rates of inflation, dwindling inflows of foreign direct investment, and low revenues from traditional exports. “To buffer such economic and financial shocks, countries are looking at various instruments to protect their economies from such economic uncertainties.” He added, “Gold reserve is a valuable asset and inexpensive to store, and it doesn't frequently fluctuate. I think this is a noble move by the government of Rwanda.” With plans of purchasing gold, experts also highlighted that Rwanda would be following in the footsteps of neighbouring countries such as Uganda and Tanzania, which have already laid out plans to diversify and boost their reserve holdings. For instance, Karobia pointed out, many central banks, including those in China, India, Turkey, Poland, and Russia, have significantly increased their gold holdings since 2022. He maintained that the move reflects a growing trend to reduce overreliance on the United States Dollar-denominated assets, hedge against geopolitical fragmentation, and build resilience against financial sanctions or currency volatility. Closer home, he added, countries like Ghana have pursued gold-backed reserve strategies. “For Rwanda, adopting a similar approach could signal a forward-looking reserve management policy, align with continental efforts to build commodities-backed monetary sovereignty, and support longer-term monetary policy innovation and resilience.” What are the risks? While gold offers strong defensive characteristics, it comes with notable trade-offs, experts warned. For instance, unlike bonds or deposits, gold does not pay interest, making it less attractive in a high-rate global environment. According to Karobia, this represents a real opportunity cost for holding non-yielding assets. He also added that for the majority, funds allocated to gold are not available for domestic development investments or higher-yielding assets that can directly support Rwanda’s growth agenda. “Entering after a strong rally, such as the one seen currently in 2025, introduces the risk of capital losses if prices correct.” He said that physical gold requires secure storage, insurance, and may involve foreign custodianship, adding operational and geopolitical considerations. For Kalisa, there are always political and market risks associated with gold reserves, and these need to be monitored frequently. Central Bank position Purchasing gold is a strategic move aimed at diversifying the central bank’s reserves, according to Deputy Governor Justin Nsengiyumva. As it stands, he said that the central bank holds a mix of assets, including U.S. Treasury bills and central bank bonds. But given increasing geopolitical unpredictability, he explained that the central bank is moving to add gold, which has proven to be one of the safest reserve assets over time. “So, the goal is both diversification and safeguarding financial sovereignty. We may store it domestically or in a secure foreign location.” He explained that Gold must meet international standards, including a purity level of around 99.9 percent, adding that Rwanda is already home to a certified gold refinery plant. “But we’re also open to sourcing from international markets, as long as the standards are met,” Nsengiyumva reiterated.

News

Experts weigh in on Rwanda’s plan to add gold to foreign reserves