KENYA: Ruto’s Push To Reduce Kenya’s Dependence On Foreign Currencies Gains Traction

      By Lisbeth Micheni, Kenya 

Kenya has taken a significant step towards reducing its reliance on the United States dollar and other foreign currencies in trade by adopting a new pan-African payment system.

The initiative, backed by Afreximbank and the African Union (AU), is expected to streamline intra-African transactions.

The Pan-African Payments Settlement System (PAPSS), which launched in early 2022, now enables businesses to trade using their local currencies.

This means that traders no longer need to convert their money into US dollars or euros when engaging in cross-border trade.

PAPSS is already in use in several African countries, including Nigeria, Ghana, Kenya, and Zimbabwe, with plans to onboard all nations on the continent.

President William Ruto has been vocal about the challenges businesses face due to currency conversion requirements.

Speaking at a recent trade forum, he emphasized the need for Africa to conduct business without involving foreign currencies.

He sees PAPSS as a critical tool in realizing this vision, eliminating hurdles for entrepreneurs.

According to Afreximbank, the system has the potential to save African businesses an estimated $5 billion annually in transaction costs.

It also allows for quicker and more efficient cross-border payments, reducing the need for correspondent banks outside Africa.

Central banks across Africa are responsible for supervising the platform’s operations.

The system only facilitates payments in legal tender, meaning it does not support cryptocurrencies or central bank digital currencies.

Historically, most African trade transactions have depended on the US dollar, which has put pressure on local currencies and foreign exchange reserves. By making it possible for businesses to transact directly in their national currencies, PAPSS could significantly ease these challenges.

Central Bank of Kenya Governor Kamau Thugge noted that this development comes at the right time, as many African economies are dealing with foreign exchange shortages.

He added that Kenyan traders could now benefit from new opportunities within the African Continental Free Trade Area (AfCFTA).

With PAPSS gaining momentum, the hope is that it will simplify transactions, cut costs, and strengthen economic ties across Africa.