State parties under AfCFTA urged to formulate policies to regulate digital currency regime
The Ghana International Trade and Finance Conference (GITFiC) has called on State parties under the Africa Continental Free Trade Area (AfCFTA) agreement to formulate policies for the regulation of the digital currency regime.
This, it said, would present a viable means to improve financial inclusion on the African continent.
Ms Bridget Agbenya, a Research Intern from Ashesi University at GITFiC, presenting the August 2021 Research Report, re-echoed the recommendation given by the Vice President, Dr Mahamadu Bawumia on the need for the Pan-African Payment and Settlement Systems (PAPSS).
The architecture, she said, would allow national banks of State Parties to connect to ensure seamless operationalisation and financial integration.
The Report was on the Impact of Digital Payment Systems in Facilitating Cross Border Trade under AfCFTA.
GITFiC’s August 2021 paper considers an overview of digital payment and discusses the structure of digital payment systems with a focus on adopting a continental single digital currency, which is expected to facilitate the operationalisation of the AfCFTA.
The AfCFTA is about to experience a system of digitalisation process of transactions through the institution of the PAPSS, which is being developed under the supervision of the African Export-Import Bank (Afreximbank).
The African Union Heads of State formally adopted this system in July 2019 to support the implementation of the AfCFTA.
PAPSS is expected to create new financial flows and successfully facilitate trade and other economic activities among African countries.
The PAPSS is anticipated to minimize the financial cost of cross-border trade and improve financial integration, as well as boost intra- African trade and investment competitiveness.
The system will allow a small trader in Ghana to freely import goods from Sierra Leone, using the Ghana Cedi without thinking of his ability to buy a third currency, exchange and settlement costs and the length of time it takes for payment to arrive.
To facilitate the implementation of the PAPSS, Afreximbank has created a US$1bn AfCFTA adjustment facility to “enable countries to adjust in an orderly manner to sudden significant tariff revenue losses” which may be occasioned by the immediate implementation of the Agreement.
This will undoubtedly help in cushioning State Parties as they may lose some form of revenue under the tariff liberalization under the Agreement.
She said there was the need for governments to encourage and invest adequately in financial technology (fintech) particularly startup businesses to boost technology transfer.
The Research Assistant said since cross border trade across the continent was largely informal, it was recommended that the programme should build institutional capacity among stakeholders and businesses, particularly in the informal sector.
Ms Agbenya said AfCFTA Secretariat should assure and guarantee that at least one per cent of all Transactional Revenues under the PAPSS were remitted to Central Banks of the contracting State Parties.
“This, we at GITFiC, believes will spike the interest and commitment in ensuring the success of the PAPSS,” she added.
She said the emergence of digital currencies such as Bitcoin and Litecoin have attracted significant attention, with Ghana having started a pilot exercise on a digital currency known as ‘e cedi’.
Mr Alex Nortey, President of Ghana Chamber of Commerce, said the goal of attaining socio-economic development on the continent could only be successful if “we set our focus on improving, deepening trade and ensuring a stable resilient financial system.”
He said, “I believe that some of these digital payment systems could eliminate such risks posed by these transfers of large amounts.”
“In electronic payments, you do not have to worry about withholding your payments details as you can provide details to your customers beforehand,” he said.
READ ALSO: 69% Of African Countries Ready For Free Trade On AfCFTA