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International trade

Africa Takes a Step Towards Financial Independence with Pan-African Card Payment Scheme

Strategic Insights

— 1 min read

Africa's long-standing reliance on the U.S. dollar has placed the continent in a position of financial dependence and economic vulnerability. The dollar has become the dominant currency for global trade, with nearly all imports, international loans, and trade between African countries being settled in dollars. This has had far-reaching implications, including the fluctuation of the dollar putting significant pressure on Africa's public debt, with around 40% of public debt being external and over 60% of that being denominated in dollars.

Key Takeaways:

  • The dollar accounted for 57.4% of global foreign exchange reserves in Q3 2024, and 88% of global currency exchanges involve the dollar.
  • Africa's public debt is heavily denominated in dollars, with around 40% being external and over 60% being denominated in dollars.
  • The fluctuation of the dollar has put significant pressure on Africa's public debt, with some countries experiencing a drop in their currencies by as much as 40%.
  • The PAPSSCARD, a Pan-African card payment scheme, is expected to transform Africa's payment infrastructure by reducing reliance on foreign systems.
  • The PAPSSCARD is a joint venture between Afreximbank, the Pan-African Payment and Settlement System (PAPSS), and Mercury Payment Services (MPS).
  • The card is designed to facilitate fast, secure, and cost-effective retail transactions across African borders, reducing transaction fees and limiting control over financial data.
  • The PAPSSCARD is expected to benefit a wide spectrum of users, including governments, banks, merchants, and everyday consumers.

Statistics:

  • 57.4% of global foreign exchange reserves were held in dollars in Q3 2024.
  • 88% of global currency exchanges involved the dollar.
  • Around 40% of Africa's public debt is external.
  • Over 60% of Africa's public debt is denominated in dollars.
  • The dollar's fluctuation has resulted in some African countries experiencing a drop in their currencies by as much as 40%.
  • The PAPSSCARD is expected to reduce transaction costs for public institutions, drive financial sector innovation, and improve access to modern, secure payment tools across Africa.

Sources:

  • IMF (no date)
  • Daily Trust (no date)
  • Afreximbank (no date)
  • International Monetary Fund (no date)
  • Daily Trust (no date)
  • Daily Trust (no date)
  • Afreximbank (no date)
  • International Monetary Fund (no date)

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