The pilot for a groundbreaking scheme to allow CARICOM nations to trade using their own currencies, bypassing third-party currencies like the US dollar, is set to begin “soon,” according to Kevin Greenidge, the Central Bank of Barbados governor. Greenidge, who chairs the CARICOM group of central bank governors, announced this development following a recent meeting where regional governors agreed to push ahead with a Caribbean version of the Pan-African Payment and Settlement System (PAPSS).
Launched by the African Export-Import Bank (Afreximbank) in January 2022, PAPSS aims to reduce reliance on hard currencies for transactions between African nations. If successfully replicated in the Caribbean, the system would enable direct payments in the currencies of CARICOM nations involved in trade, reducing transaction costs, minimizing the need for substantial foreign currency reserves, and facilitating smoother intra-regional trade, potentially lowering retail prices.
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In October, 11 CARICOM central bankers unanimously decided to adopt PAPSS as the preferred system for settling intra-regional trade transactions. “We just had a meeting in May and agreed to push ahead with the pilot programme,” Greenidge stated. “A technical team is working on the details, and we aim to implement the programme as soon as possible.”
PAPSS allows payments across Africa without going through external banks. Greenidge explained that a similar approach would work within CARICOM: “A company in Barbados selling to a Caribbean company wouldn’t need foreign reserves. Barbados dollars could be used in Saint Lucia and EC dollars in Barbados.”
This system could initially facilitate intra-CARICOM trade using domestic currencies, with any residual balances potentially settled in a major reserve currency like the US dollar. Once established, the Caribbean system could connect with the African PAPSS.
Greenidge shared these insights during a panel discussion on economic transformation strategies at Afreximbank’s annual meetings and the third AfriCaribbean Trade and Investment Forum (ACTIF2024) in Nassau, Bahamas. Host central bank governor John Rolle highlighted the potential benefits of replicating PAPSS in the Caribbean, emphasizing its role in making international payment systems more integrated, faster, and cheaper for consumers.
“A successful project in the Caribbean could help us conserve precious international reserves and expand intra-regional trade,” Rolle said.
Greenidge stressed the importance of collaboration between the Caribbean and Africa, referring to the Caribbean as the “55th African state.” He urged both regions to speak with one voice on global financial reform, criticizing credit rating agencies for bias against small economies.
“If we unite and advocate for changes in how rating agencies assess our economies, we can make a difference,” Greenidge said, echoing sentiments shared by other panelists, including Afreximbank senior executive vice-president Denys Denya and Nigeria’s former vice-president Yemi Osinbajo.
Greenidge also supported the Bridgetown Initiative, which calls for reform of multilateral development banks and international financial institutions to better support climate-vulnerable countries. He emphasized that collaboration with Africa is crucial for the Caribbean to secure sufficient financing and investment.
“The more we build global partnerships, the better our financing and investment prospects,” Greenidge concluded, highlighting the natural synergy between the Caribbean and the African continent.
