Members of the East African Community states have recently announced that the America dollar will soon seize to be the medium of exchange for cross-border trade.
This announcement was made following an agreement between central banks of the EAC member states for the purpose of promoting trade using various local currencies as opposed to the dollar. This will see the gradual phasing out of the American currency as the common currency in cross-border trade in the region.
Before now, business transactions required the need for a conversion of national currencies to the Dollar before conducting transactions and later convert the currency back to their national currency.
Experts say the move will cushion respective national economies against volatility of exchange rate markets, which often expose traders to high exchange rate costs.
Thomas Kagabo, the chief economist at the National Bank of Rwanda (BNR), said following the signing of the memorandum of Understanding between the countries, central banks had also opened accounts for the five regional currencies so that they can accept the currencies from the commercial banks.
“The first step was signing the agreement. The last meeting recommended that each central bank will work with other stakeholders to sensitise people accept regional currencies. These include commercial banks, traders and sellers,” he said.
Kagabo said the next step is raising awareness among traders and commercial banks in the region to accept regional currencies in the exchange of goods and services.
This will help reduce the number of traders across the region using the dollar as the preferred currency for cross border trade and increase use of local currencies.
“We have designed tools for sensitisation. Governors have been requested to identify key players to make it accepted,” Kagabo said.
However, Kagabo said central banks will use a unanimously agreed upon exchange rate shared daily across the region.
Source: The New Times
