Kenya’s President William Ruto during his address at Djibouti parliament emphasized on the need to abandon the reliance on the U.S. dollars for intra-African trade on Tuesday. He asked his other counterparts of the African continent to replace the U.S. dollars with the Pan-African Payments and Settlement System (PAPSS) which would enhance the movement of goods and services.This alternative was first introduced on Jan. 2022 to navigate trade among African nations in their local currencies.
It seems President Ruto has joined the already existing de-dollarisation campaign by China, Russia, India, ASEAN nations, UAE and Saudi Arabia. The campaign strongly encourages the usage of local currencies for trade as an alternative to the U.S. dollar hegemony. Countries like Brazil and Southeast Asian nations in ASEAN have also ditched the U.S. dollar in their bilateral trade. The UAE uses yuan to sell its gas to China through a French company.
Ruto also mentioned that he does not intend to oppose the dollars but to make trade easier and simpler in his continent. He said that the trade with the United States can be in U.S. dollars while the transactions with Djibouti and other African nations should be in their local currency.
The alternative payment system, PAPSS, is backed by the central banks on the African continent and was developed by the African Export-Import bank (Afreximbank) and the African continent Free Trade Area (AFCFTA) Secretariat, according to the East African report. Explaining the need for this alternative, Ruto said,
“We are all struggling to make payments for goods and services from one country to another because of differences in currencies. And in the middle of all these, we are all subjected to a dollar environment.”
Kenya, the largest economy in the East-African continent is currently struggling with food shortage and has also been a victim of the drought. Kenya has also suffered from acute fuel shortage which the marketers link to the delay in the release of cash for fuel subsidies.
He also said, “That is why Kenya champions the Pan African Payment and Settlement System that is done by our own institution — the Afreximbank. Why, members? Why is it necessary for us to buy things from Djibouti and pay in dollars? There is no reason.”
The idea of a single currency floating across Africa was first mentioned by former leader of Lybia Muammar Ghaddafi, who also mentioned how all the countries in Europe use a single currency, i.e the euro. He brought it up in one of the summits of African leaders during the final years of his 42-year long rule in the North African country before he was assassinated in 2011 by one of his own men.
The idea could not follow through then because most of the payments received by Tanzania from fairly strong economies like China and Japan had to be converted to dollars. However, with Egypt being the latest entrant seeking to use local currency for trade, the possibility seems real.
Image source: The Daily Guardian
Editor: Nandini Roy
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