Explainer| Would the African payment system liberate Africa from the US dollar?
Six Egyptian banks have applied to join the Pan-African Payment and Settlement System (PAPSS), alongside plans to link InstaPay to enable personal transactions.
The system functions as a banking network that enables two African countries to trade directly in their local currencies, reigniting debate over whether the continent can break free from US dollar dominance.
What are the advantages of PAPSS?
Launched in Ghana in 2022 by the African Union and the African Export-Import Bank (Afreximbank), PAPSS bypasses outside intermediary banks and major foreign currencies to settle cross-border transactions. The Central Bank of Egypt joined the network two years later.
During his visit to Egypt in September, PAPSS CEO Mike Ogbalu said the system now includes 30 African countries out of a total of 41 central banks, indicating the rapid expansion of this system across the continent.
Under the traditional cross-border trading system, money does not move directly from the importing country’s bank to the exporting country’s bank, economist Mohamed Anis explained to Al Manassa. Instead, transactions are routed through intermediary banks outside the continent using third-party currencies like the dollar.
Anis noted PAPSS’ primary advantage is that it allows two countries on the continent to exchange trade without relying on intermediaries or major currencies.
Khaled Abu El-Makarem, head of the Chemical and Fertilizers Export Council, pointed out that such intermediary links add time and costs to imports, limiting the growth opportunities for African trade.
He stressed to Al Manassa that the new payment system will help African countries avoid the biggest trade challenge, which is securing hard currency.
What do the numbers tell us?
While in Egypt, Ogbalu said PAPSS reduced the cost of transfers within the continent by up to 95%, in addition to shortening transaction execution time from several days to a maximum of 120 seconds, with an average of only 7 seconds per operation.
For companies, the value lies not just in lower transfer fees, but in shorter timeframes. Every additional day and intermediary step drives up total transaction costs. This is more important for small and medium enterprises, as reducing the cost and duration of settlement can make some small deals more economically viable, according to Abu El-Makarem.
Mina Rafik, a senior analyst at Prime Investments, noted that settling transactions in local currencies also reduces the need for African countries to accumulate massive foreign exchange reserves, which become significantly more expensive to acquire during periods of high US interest rates.
While Egypt’s foreign exchange reserves have hit unprecedented highs, accumulating them forced the government into major land deals and foreign loans to boost confidence in the pound.
Can we really break free from the dollar?
The launch of PAPSS coincides with calls to break free from the dollar’s dominance over international transactions, most notably those coming from the BRICS group.
Data on the currency breakdown of foreign exchange reserves worldwide reflects a decline in the dollar’s share from 70% at the beginning of the millennium to about 57% currently, confirming the desire of many countries to reduce reliance on the US currency.
However, Abu El-Makarem cautions that predictions about the complete end of the dollar’s role as a trade intermediary are overstated. “The dollar will remain important in some transactions, while settlements in local currencies can expand gradually according to the conditions of each market,” he said.
Abu El-Makarem pointed to limited intra-continental trade as a primary obstacle to the system’s expansion. “Facilitating the movement of money does not automatically mean an increase in trade,” he said, noting that Egyptian exporters still face steep hurdles in financing, marketing, logistics, client trust, and regulatory compliance when entering new markets.
Trade between Egypt and African countries represented about 6.3% of total trade (15.4% of total exports and 1.6% of total imports) in 2025. Consequently, the limited volume of trade reduces the system’s impact on foreign reserves, despite its importance in reducing reliance on the dollar, as Rafik confirmed.
Anis expects that transactions by individuals within Africa will also remain limited, reducing the impact of linking InstaPay with the new payment system.
According to data from the Central Agency for Public Mobilization and Statistics, the value of remittances from Egyptians working in African Union countries reached $191 million during the 2024/25 fiscal year, while the value of remittances from workers from African Union countries in Egypt recorded $26.2 million during the same period.
What makes us optimistic?
Despite the limited trade transactions between Egypt and African countries, trade data for the last decade indicates strong growth in Egyptian exports since 2020, which may pave the way for the growth of financial transactions between the two parties.
Ahmed Zaki, secretary-general of the exporters division at the Federation of Egyptian Chambers of Commerce and head of the division’s African Affairs Committee, noted that the disruptions witnessed by the global economy in recent years have created additional opportunities for Egyptian exports. The coronavirus pandemic disrupted supply chains in China and East Asia, and then the Russian-Ukrainian war compounded the difficulties.
Zaki told Al Manassa that the continued growth of Egyptian exports to Africa requires exploiting these opportunities more efficiently, increasing the importance of PAPSS at the present time.
The true test for PAPSS will be whether streamlined payments can translate into deeper intra-African trade and a meaningful shift away from major foreign currencies.