Kenya has joined the Pan African Payments and Settlement System (PAPSS), allowing companies in the East African nation to transact with counterparts in other countries on the continent using their local currencies.
The Central Bank of Kenya signed the agreement that a cabinet minister said will be a big boost for African free trade as it will lower foreign exchange expenses associated with needing to use the US dollar or euros to make transactions.
“The Central Bank of Kenya has signed the instruments that have finally seen Kenya join the Pan African Payments and Settlement System (PAPSS),” Trade Cabinet Secretary Moses Kuria said on messaging service X, formerly known as Twitter.
“This means that Kenyan companies can trade with their peers from other African Member States using our local Currencies, a major boost for the African Continental Free Trade Area (AfCFTA).”
African countries began officially trading under AfCFTA, a continent-wide free trade area in January 2021. The bloc intends to unite more than one billion people in a $3 trillion economic bloc – the world’s largest free trade area since the World Trade Organization’s inception.
Supporters of the trade bloc expect it to increase trade among African neighbours. The World Bank has estimated it has the potential to raise tens of millions out of poverty by 2035.
Nigeria, Ghana, Liberia, Guinea, Sierra Leone and The Gambia have joined Zambia, Zimbabwe and Djibouti are also on the PAPSS platform.
There is a worldwide de-dollarisation drive that is gaining traction as countries throughout the world seek alternatives to the dollar’s monopoly, with China and Russia now trading in their own currencies, and China and Brazil both dropping the dollar in bilateral commerce.
Saudi Arabia, the UAE, Brazil, India, South Africa and the Association of Southeast Asian Nations (ASEAN) have all backed steps towards de-dollarisation.
Speaking at a regional summit in Djibouti in June, Kenyan President William Ruto backed de-dollarization for Africa trade, saying his country supported PAPSS, and the Egypt-based African Export-Import Bank (Afreximbank) which runs the payment system.
Afreximbank is in the process of evaluating Kenya’s proposal to host a pan-African settlement house for intra-African trade deals.
Afreximbank launched PAPPS in January 2022 after a trial involving six central banks in the West African Monetary Zone.