Browsing: Pan-African Payment Settlement System (PAPSS)

De-dollarise African trade

There appears to be a consensus that the world is finally turning its back on the US dollar. There are simmering shifts within the global monetary system. The shift becomes ever more apparent, best described as de-dollarisation.

The world is searching for alternatives to the US dollar, finding them more often. Thus, moving away from the dollar can no longer be stopped. For instance, early this year, Indonesia reiterated it would promote local currency settlement (LCS) in cross-border trade and investment to reduce dependence on the US dollar.

For that purpose, PAPSS has entered into a Memorandum of Understanding (MoU) with Buna, the Arab Monetary Fund’s cross-border payment system. Its objective is to make it feasible for central banks in the Arab world and financial institutions elsewhere to send and receive payments in local and international currencies.

“Buna offers potential for financial integration and economic integration in the Arab area and strengthens investment relations with global trading partners.”

According to officials who announced the arrangement on Tuesday, the latest partnership lays the groundwork for PAPSS and BUNA  to develop an Africa-Arab payment gateway.

African countries’ attempts to form a common regional currency have proven futile precisely because of all the frameworks of laws that need to be revised and harmonized in the different countries. For example, the eco in West Africa and the shilling in East Africa.

Ghana and Nigeria have even gone ahead to create their central bank digital currencies, indicating their lack of belief in the workability of the eco.

What does this mean? In the next 100 years or more, Africa cannot create a common currency acceptable throughout the continent.