Kenya president urges countries to get rid of us dollars

Since last year, Kenyan importers such as oil marketers and manufacturers have complained about a massive imbalance in demand and supply of US dollars, forcing them to acquire in large quantities and at prices far above the official rate. In fact, the Kenya Association of Manufacturers said last year that the currency crisis had strained relations with suppliers at a time when competition for raw materials had increased due to rising demand and ongoing supply chain limitations. This disparity has caused the Kenyan currency to lose roughly 12.1 percent of its value since the beginning of the year, trading at around 138.33 units per dollar, causing the price of critical inputs such as fuel and raw materials to soar. So it was no surprise when Kenya’s President, William Ruto, advocated in a recent speech to the Djibouti Parliament that African nations forgo the use of dollars for intercontinental trade.

Usually, traders in Djibouti and Kenya have to acquire US dollars before engaging in trade but during his speech President Ruto questioned the necessity of involving the US currency in the trade activities between the two nations. He emphasized that there is no valid basis for this practice, and he urged that transactions between the two countries be conducted in local currencies. He went on to discuss the African Export-Import Bank (Afreximbank), which provided a system that allows traders on the continent to conduct commerce in their various local currencies. He then stressed that the objective is not to oppose the US currency, but rather to promote more open trade, and that purchases from the US can still be handled in US dollars. President Ruto’s proposal comes at a time when some countries are lobbying for global de-dollarization and looking for alternatives to the US dollar, with countries such as China and Russia currently trading in their own currencies.

During a forum in the African Continental Free Trade Area (AfCFTA), President Ruto yet again underlined the need for African countries to ditch the US dollar on trade deals. He urged them to take the initial steps toward replacing the US dollar as the world’s reserve currency by adopting a pan-African settlement system to facilitate intra-African commerce. This alternative payment system, also known as PAPSS, was inaugurated in January 2022 and allows African countries to trade among themselves using their individual currencies. Backed by the African Union and African central banks, the system for intra-African trade was developed by African Export-Import Bank (Afreximbank) and African Continental Free Trade Area (AfCFTA) Secretariat.

Explaining why African countries must abandon the dollar, the Kenyan leader reportedly said: We are all struggling to make payments for goods and services from one country to another because of differences in currencies. And in the middle of all these, we are all subjected to a dollar environment. And he further explained that when the settlement system is in play, business people’s only concern would be how to move goods and services while the “arduous task of currencies” will be left to Afreximbank, a pan-African multilateral trade finance institution.

While some people have applauded the president on his stance, others have cautioned that implementing President Ruto’s call for a shift away from the US dollar may face challenges.

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