Pan-African Payment System to Cut Dollar Dependency

In 2021, the African Export-Import Bank (Afrexim Bank) partnered with the African Continental Free Trade Area (AfCFTA) Secretariat to launch the Pan-African Payments and Settlement Systems (PAPSS), a platform that facilitates instant cross-border payments in local currencies between countries.

The platform has started commercial operations with nine countries signed up so far and currently uses the dollar exchange rates. However, the Afrexim Bank, the AfCFTA Secretariate and the partnering central banks are working collaboratively to develop an exchange-rate mechanism that would allow for Africa’s currencies to be convertible among themselves. This has been fronted as domesticating intra-African payments. The great majority of intra-regional trade in Africa is carried out using dollar exchange rates. PAPSS and the AfCFTA, which would establish the largest free trade zone by area in the world, both aim to increase internal trade by removing obstacles, including the requirement for intermediaries like the US currency.

Africa is not the only emerging market seeking for methods to reduce its reliance on US dollars; India is also trying to de-dollarize its economy by facilitating trade using the rupee. China and Malaysia have experimented with the concept of an Asian Monetary Fund, and Brazil and Argentina have declared plans to create a unified currency known as the “sur.”

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