Malawi sells domestic gold reserves to cover rising fuel costs

On Friday, the Reserve Bank of Malawi said that it sold 590 kilograms of gold, more than half a tonne, to raise $78 million to cover rising fuel costs.

In an interview with Reuters, central bank spokesperson Boston Maliketi Banda said that the gold it sold was from local artisanal miners.

“Our pure gold in our international reserves remains not for sale and is in the safe custody of New York Federal Reserve Bank,” Banda said.

According to official reserves, the southeastern Africa nation holds $61 million in gold.

Banda said that it still has 69 kg of artisanal gold it can use to cover fuel costs.

The central bank said it was in talks with Afreximbank for a $120 million loan to help the country buy fuel.

While Malawi has sold most of its domestic gold, the central bank said that it will continue buying the precious metal from small-scale miners to rebuild its stock.

African nations have been taking a more active role in their domestic gold production. Recently Uganda and Kenya, have launched their own domestic gold purchase programs to build foreign reserves.

Although central bank gold sales have been a headwind for gold in recent weeks, adding the selling pressure from speculative traders, analysts have said that the monetization of global reserves is proving a solid use-case scenario for gold as an important monetary asset.

Analysts expect that when the inflation and fuel supply crisis has ended, central banks will continue to increase their official gold reserves.