Calls for Reduced Reliance on US Dollar in Intra-African Trade
Nairobi, 12 June – In a compelling address delivered at the Djibouti parliament, Kenyan President William Ruto stirred a wave of enthusiasm among Africans by proposing a paradigm shift in intercontinental trade. Ruto urged African nations to embrace the use of local currencies for trade within the continent while reserving the US dollar for transactions involving the United States.
In his impassioned speech, the Kenyan leader emphasized the importance of fostering economic integration and reducing dependence on foreign currencies. He cited the need to empower African economies by promoting trade using local currencies, a move that could bolster regional financial stability and enhance economic independence.
“Traders from Djibouti selling to Kenya and vice versa have to look for US dollars. How is US dollars part of the trade between Djibouti and Kenya? Why?” President Ruto stated emphatically. “And we are saying, Afrexim bank has given us a mechanism where traders in our continent can trade in their goods and services and the bank will settle payment in local currencies.”
Ruto added, that Kenya is championing the Pan-African payment and settlement system that is done by African institutions.
“Why members? Why is it necessary for us to buy things from Djibouti and pay in dollars? Why? There is no reason,” said Ruto.
He clarified that he wasn’t against the US dollar.
“We just want to trade much more freely. Let us use dollars when paying for what we are buying from the US. What we are buying from Djibouti. Let’s use the local currency,”
The audience, comprised of Djibouti leaders, and parliamentarians responded with resounding applause, demonstrating their support for President Ruto’s bold vision.
The proposition to utilize local currencies in intra-African trade comes as part of a broader movement within the continent to establish a self-sustaining economic ecosystem. It seeks to capitalize on the African Union’s Agenda 2063, which advocates for comprehensive socio-economic transformation across Africa.
However, President Ruto acknowledged the challenges that lie ahead in implementing such a system. African currencies, characterized by varying levels of liquidity and stability, must be strengthened to ensure their effectiveness in facilitating seamless transactions. Furthermore, building the necessary financial infrastructure to support a local currency trading system will require collaborative efforts among African nations.
To pave the way for this groundbreaking endeavor, the African Continental Free Trade Area (AfCFTA), which commenced earlier this year, aims to create a unified and liberalized market for goods and services across the continent.
The AfCFTA, with its ambitious goals of boosting intra-African trade and encouraging economic development, could serve as a catalyst for the adoption of local currency trade.
While the proposal sparked enthusiasm among Djiboutians and Africans, it also sparked intense debate. Critics argue that the lack of liquidity and stability in some African currencies could hamper the efficiency of such a system.
Others express concerns about the potential impact on existing trade partnerships with non-African countries.
Nevertheless, President Ruto’s bold call to embrace local currencies in African trade has opened up a new chapter in the continent’s economic narrative. It has reignited conversations about economic independence, financial integration, and the empowerment of African nations.
As African leaders and policymakers embark on the arduous journey of reshaping trade practices, the continent stands at a crossroads. The successful implementation of local currency trade could redefine Africa’s economic landscape, fostering self-reliance and a sense of collective empowerment among its nations.
Only time will tell whether President Ruto’s passionate plea for local currency trade will become a reality. Yet, his words reverberate across the continent, igniting hope and inspiring a new generation of leaders who envision an economically prosperous and united Africa, with local currencies as the backbone of its vibrant trade ecosystem.
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