President William Ruto’s push for Africa to ditch the dollar is bearing fruits after Trade Cabinet Secretary Moses Kuria announced the implementation of the use of a single currency for trade.
Through a statement on Friday, September 30, Kuria revealed that the Central Bank of Kenya (CBK) had signed the necessary deals to allow Kenyans to engage in the payment system.
Moreover, he explained that the payment system, dubbed the Pan African Payments and Settlement System (PAPSS), would allow Kenyan companies to trade using the local currency.
“I am pleased to announce that the Central Bank of Kenya has signed the instruments that have finally seen Kenya join the Pan African Payments and Settlement System (PAPSS).
“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),” the statement read in part.
The Pan African Payments and Settlement System Explained
Formally launched in January 2022, the Pan African Payments and Settlement System is a centralized payment and settlement system for intra-African trade in goods and services.
Currently, Africa has about 42 individual currencies. PAPSS therefore allows companies in Africa to pay for intra-African trade transactions in their local currency.
Moreover, PAPSS is expected to reduce the costs of trade between the African countries by eliminating the use of the dollar.
Also Read: Foreign Investors Avoid Kenya Over Dollar Shortage
Further, the payment system uses a digital cloud-based platform developed by StoneX. African Central Banks are tasked to oversee the governance and daily operation of the PAPSS, which is headquartered in Cairo, Egypt.
PAPSS is only an exchange for legal tender, not digital assets like cryptocurrencies or Central Bank Digital Currencies.
How to Send Money Using PASS
To send payments using the system, a company issues a payment instruction to their local bank or payment service provider.
The bank then sends instructions to their Central Bank, which sends it to PAPSS.
PAPSS will then validate the instruction and forward it to the beneficiary’s Central Bank and then local bank.
The local bank then pays the transferred funds in local currency to the beneficiary.
Also Read: Central African Republic adopts bitcoin as legal currency
Ruto’s anti-dollar war
Earlier on May 29, President William Ruto proposed the formation of a financial infrastructure that would enable all African countries to trade using the local currency instead of the dollar.
He noted that the move would save Kenyan businessmen millions or more and free them from the obstacles of currencies.
“We are all struggling, and our businessmen are struggling to make payment for goods and services from one country to another because we are subjected to a dollar environment.
“Why are we bringing dollars in the middle of our trade? In the process, our businesspeople are stranded because we are looking for dollars,” Ruto questioned.
Ruto noted that the African Export-Import Bank had already embarked on building a centralized payment system of payment across Africa known as the Pan African Payment and Settlement system.
He stated that the system allowed investors to instantly make payments in local currencies and eliminate cross-border payments.
