BRIDGETOWN, Barbados – Barbados will be the regional headquarters of the Trade Finance Bank For Africa (Afreximbank) making available US$1.5 billion to the Caribbean region with room for expansion if all the countries come on board, Prime Minister Mia Mottley has said.
She told a news conference last Thursday that here will also be a pilot scheme to facilitate use of the Pan African Payments and Settlements System which will be a “huge, huge benefit if it works”.
She said this will streamline trade by netting off transactions and minimizing the need for extensive foreign currency exchanges.
Mottley said that during her recent trip to Africa, a decision was taken to have Afreximbank open its headquarters here on August 4 this year.
“That is the date we are looking at now. They have already chosen an office and they are already looking to see what else they need to do in order to be able to get functional,” she said.
“The other major benefit that we have worked out is that there will be a pilot scheme to be able to facilitate our use of the Pan-African Payments and Settlement System (PAPSS), which is a huge benefit if it works”.
Mottley was not in a position to say when the pilot for the settlement system would begin or how long it would last but explained that it would allow for countries to do trade using some of their own local currency.
“Why is this important? Instead of having to find US dollars for every single possible trade that you do within the region, it then means that you can do that netting off. So, the absolute amount of US dollars that you need to find will be significantly reduced. This is a major achievement for the region if the pilot works out well. It will be a huge advantage to us but we must start with the pilot,” she said.
She recalled the short-lived CARICOM Multilateral Clearing Facility (CMCF), which started in the late 1970s and failed in the early 1980s, saying that “these payment schemes invariably require some kind of underpinning/ backstopping and the Afreximbank is prepared to provide that backstopping as they do in Africa at the moment.
“That will make a huge difference if it can work. What typically would happen is that you net off each other’s trade and then you look just to pay the difference in the hard currency,” she added.
Barbados last year had signed a memorandum of understanding (MOU) with the Afreximbank to begin the process of the deepening of trade and investment cooperation between Africa and the Caribbean region.
Mottley told reporters Thursday that it was agreed last week that the CARICOM Development Fund (CDF), which was established in 2008 to provide concessional financial or technical assistance to disadvantaged countries, sectors and regions in the Caribbean Community, would become a shareholder in the Afreximbank.
She said this would allow the two organizations to “work together to issue jointly, financial instruments that will help sap up some of the excess savings that we have in the Caribbean”.
Mottley said that up to two years ago, there was around US$100 billion in savings in the region attracting interest rates next to nothing, adding that the partnership would allow for the floating of an investment instrument that would allow people to get higher interest while allowing for cheaper lending to disadvantaged countries, sectors and regions in the Caribbean from the CDF.
Mottley also disclosed that with Barbados holding the presidency of the United Nations Conference for Trade and Development (UNCTAD), officials here will be hosting a global supply chain forum in Bridgetown next year “in order to allow developing countries like ourselves to better understand how the supply chain framework will be reformatted and reshaped in a way that helps us better.”
She said it was necessary to “deconstruct and reconstruct the global supply chain, particularly given the level of economic activity that is going to be thrust upon the world with respect to green transition”.
