 Invoice Currency and Trade Facilitation in Africa: A ReviewOdongo Kodongo ()
Africagrowth Agenda, 2022, vol. 19, issue 4, 4-7 Abstract: The currency in which import and export trade is invoiced in international trade matters. It determines the effects of exchange rates on countries’ balance of trade and determines how shocks are transmitted across countries, and by extension, the design of optimal monetary policy. Studies demonstrate that firms, especially those in developing countries, including most African countries, invoice in a third/vehicle currency, with the US dollar often preferred regardless of the countries of the counterparties to the trade. Recent appreciations in the value of the US dollar have therefore put pressure on African countries’ currencies, forcing policymakers in these countries to increase interest rates. This effectively passes through US monetary policies to African countries. To lessen the effects of currency invoicing on Africa’s economies, the African Continental Free Trade Area (AfCFTA) secretariat has proposed the Pan-African Payment and Settlement System (PAPSS). The PAPPS addresses the adverse effects of dominant currency invoicing by encouraging settlements in traders’ domestic currencies with only the net difference settled in US dollars. This therefore reduces countries’ exposure to changes in the value of the US dollar. Date: 2022 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:afj:journ2:v:19:y:2022:i:4:p:4-7 Access Statistics for this article More articles in Africagrowth Agenda from Africagrowth Institute Contact information at EDIRC. |
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