Browsing: US dollar

Dr. Kamau Thugge

On 15 May, President William Ruto nominated Kamau Thugge as the new governor of the Central Bank of Kenya (CBK). If the Senate and the National Assembly ratify the appointment, Thugge will begin his first term as the CBK governor in mid-June. He will replace the incumbent Patrick Njoroge who assumed office as CBK governor in 2015.

The nomination of Thugge comes at a pivotal time for the Kenyan economy. Kenya’s inflation remains high at almost 8 per cent. The Kenyan shilling has also hit all-time lows against the US dollar. Thus, the monetary policies from the CBK will most likely come in handy in the coming months. But what makes Thugge the perfect fit for the crucial role of Kenya’s top banker?…

  • With tightening monetary policies globally, many African economies are struggling with falling forex reserves.
  • Low reserves have sent governments back to the drawing board strategising on how to survive future trends while balancing trade.
  • With this, leaders and policymakers in Africa are engaging in the de-dollarisation conversation.

Kenya has sent a strong message to economies in Africa on the need to accelerate dedollarisation of cross-border trade, further amplifying the global conversation on reducing reliance on the US dollar as the main mode of payment.

For over a decade, China and Russia have sought to drastically lower their usage of the US Dollar in what is commonly referred as “dedollarisation”.

This is in a move intended at shielding their economies from possible trade-limiting US sanctions. The strategy also reduces their exposure to adverse effects of US economic and monetary policy, while also asserting global economic leadership.

China, Russia slowly cutting dollar

Currency depreciation in Africa

According to SWIFT, African regions with strong integration saw increased use of local currencies and decreased use of hard currencies such as the US dollar. For instance, the use of the West African franc by the eight countries in the West African Economic and Monetary Union has overtaken the South African rand and the British West African pound.

This implies that boosting the use of regional currencies will shield the African trade market from adverse global conditions associated with the performance of US dollars. However, further regional coordination remains necessary to build a continental payment system that encourages the use of local correspondent banks and local currencies. These moves can help in managing currency depreciation to boost African trade finance. …

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BRICS currency challenging US dollar's dominance in international trade

In recent months, the discourse about de-dollarisation has gained momentum. The sanctions against Russia have exposed the danger of over-dependence on the US dollar in international trade. The recent foreign exchange challenges have also recharged the growing efforts to bolster other currencies.

De-dollarisation could soon become a reality. A BRICS substitute to the dollar could enjoy high prospects for success, a former White House adviser, Joseph Sullivan, has noted. Sullivan served as a staff economist at the White House Council of Economic Advisers during the Trump administration. According to him, a potential BRICS currency poses a unique threat to the dominance of the US dollar in international trade.…

BRICS nations championing the de-dollarization of international trade.

The global financial landscape has undergone a remarkable transformation in recent times. Remarkably, the issue of the de-dollarization of international trade is slowly but steadily gathering momentum. A rising trend toward de-dollarization is challenging the longstanding supremacy of the United States in the international financial system. As the dominant global reserve currency, the US dollar remains pivotal in international trade, investment, and financial transactions.…

Strong US dollar

Currently, Africa is over-exposed to the impact of the US Dollar. Thus, African nations must either act individually or together to mitigate these effects. Dollar strength bursts are cyclical. Therefore, there should be enough time to implement efforts before the next one occurs. African governments have recognized the harm done in the previous year and should work round the clock to find a lasting solution.…

Russia to save Africa from a strong dollar

Official data has shown that the cost of transacting in international currencies is often 2 or 3 per cent higher than dealing in local alternatives. The higher cost often creates significant international trade obstacles. Ultimately, the progressive decision-making of the Russian government could save Africa from the damaging effects of a strong dollar. Consequently, international trade will become accessible to businesses in Africa. This will boost economic growth in the respective partner countries.…

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Ghanaian Cedi depreciation

Ghana finds itself in the classic emerging market trap. This comes from owing too much in someone else’s currency when the global economic tide turns. One ought not to read too much into an emerging economy getting creative with money or to confuse the confiscation of private assets with a more conventional process of fiscal retrenchment that would gain IMF approval. If the plan succeeds, Ghana may have saved itself from an economic meltdown, especially in a period widely considered as economic turmoil, per the World Bank’s analysis of the 2023 economy.…

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Africa's debt sustainability struggles

Over the past decade, African countries have accumulated external debt at a faster pace. The countries have capitalized on abundant, low-cost international credit for fiscal and balance-of-payments funding to help drive development plans.

Africa’s total external debt, accrued by both the private and public sectors, owed to foreign lenders, has surpassed $1 trillion. The related annual debt servicing costs broke through the $100 billion threshold for the first time in 2021.…

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Kenya's economy in 2023
Economies the world over have made significant recoveries from the effects of the Covid-19 pandemic, Russia-Ukraine conflict and disruptive supply chains with positive growth recorded in 2022.
Many of these key economies are in Africa.
However, majority of the African continent remains highly exposed to risks that could hinder growth in 2023.
One of the major concerns is debt serving, where African nation's debt as a percentage of GDP has been rising faster than expected over the past decade.
It is estimated on average that most African nations' Debt to GDP ratio, as of 2022, stands at 24.1 per cent with some countries having even higher rates.
About 35 per cent of the continent’s external debt is owed to banks, asset managers and oil traders in the West, with Chinese lenders accounting for around 12 per cent.
Of the about $444 billion in debt repayments governments in the continent will