(Ecofin Agency) - The African Export-Import Bank (Afreximbank) and the Secretariat of the African Continental Free Trade Area announced today the rollout of the Pan African Payment and Settlement System (PAPSS). It is aimed at enabling African countries to make instant cross-border payments in local currencies.

“PAPSS would serve as a continent-wide platform for the processing, clearing, and settling of intra-African trade and commerce payments, leveraging a multilateral net settlement system. Its full implementation is expected to save the continent more than $5 billion in payment transaction costs each year,” according to an official statement.

The PAPSS has already been tested in the West African Monetary Zone (WAMZ), the same area where a single currency project is being developed under the Eco label. To accelerate the expansion and ensure settlement finality, Afreximbank has approved $500 million to support clearing and settlement in countries within the WAMZ. An estimated additional $3 billion will be made available to support the implementation of the system across the continent.

Central banks on the continent have agreed to use the facility, but discussions are still needed to secure maximum membership. The share of intra-African trade remains low, according to indicators from the International Trade Centre. In 2020, imports between African countries reached $58.6 billion, down for the second year in a row, and representing less than 12% of the total imports of countries in the region.

The weak volume of intra-African trade is mainly due to the multiplicity of currencies on the continent. “With the implementation of PAPSS, Africa can expect to begin to reap the fruits of the African Continental Free Trade Agreement. Afreximbank is proud to have contributed to the realization of the multi-decade dream that seemed unachievable just a few years ago,” said Benedict Oramah, Chairman of PAPSS Management Board and Afreximbank President.