As the world reels from the economic turmoil and uncertainty unleashed by Donald Trump’s chaotic tariff policy, it is increasingly clear that the neoliberal consensus is now over, and unlikely to return.

Many countries will suffer from the immediate impact of lost dollar revenues, but we should resist the trap of defending a deeply extractive system that has inflicted a crippling combination of high foreign debt, underinvestment and climate calamities upon countries in Africa.

These inequities are underpinned by profoundly hierarchical, neo-colonial financial structures that keep the dollar on top. Through the International Monetary Fund and the World Bank, a series of Structural Adjustment Programs – economic reforms including privatisation and austerity measures – have been enforced upon African economies. These hinder economic diversification and result in a toxic blend of underdevelopment and overexploitation of natural resources to accumulate dollars.

In combination with a reliance on foreign debt, this has left many African countries in debt traps and highly dependent on the dollar. The tariff fallout, combined with declining oil prices, forced Libya to devalue its dinar currency and the Nigerian central bank to spend $198m to support its naira currency – demonstrating how the current international financial architecture leaves African countries overexposed to US policy changes.

A

As a result of the hierarchical and dollar-centric financial system, 32 African countries were forced to spend more on servicing foreign debts than on healthcare in 2023. A record $1.4trn was spent by developing countries on servicing foreign debt in 2023, diverting resources away from domestic developmental priorities.

Breaking free of the current international financial system, therefore, necessitates the construction of a new financial architecture in Africa and beyond, which bypasses the dollar’s clutches.

An opportunity to forge a new financial architecture

When the dollar-based international monetary and financial system was established at the Bretton Woods conference after the Second World War, the US was the largest economy in the world at 35% of global GDP. However, with the rapid development of formerly colonised countries, the US’s share of global GDP has since consistently fallen and it now finds itself in second place at 15%, after China at 19%, when measured at purchasing power parity.

With the economic heft of the US not what it once was, financial and trade disentanglement are far more achievable than they would have been a decade or two ago. The repeated weaponisation of the dollar, and of international payment systems like SWIFT through the use of sanctions, reinforces the case for building alternative payment infrastructures based on local currencies to increase economic and monetary sovereignty.

Many countries in the Global South are already accelerating a shift to local currency financing and trade arrangements to reduce their dollar dependency. This is the primary unifier of otherwise diverging interests among BRICS members, with China already conducting half its trade using the Chinese renminbi currency.

The Pan-African Payments and Settlement System (PAPSS) was launched in 2022 and is expanding across Africa, enabling cross-border transactions and trade in local currency. PAPSS saw its transaction volumes increase ninefold in 2025, with 16 countries currently participating in the platform. Not only does this boost intra-regional trade, but it also circumvents the costly US-dominated corresponding banking systems while reducing transaction costs and foreign exchange risks.

Payment systems are becoming increasingly important economic battlegrounds due to rising geopolitical uncertainty. The likes of the EU, China, BRICS and many others are currently in the process of developing new payment platforms and new forms of money to act as alternatives to the dollar-centric traditional payment systems.

African governments and central banks could increase their economic sovereignty and financial resilience by incorporating Central Bank Digital Currencies (CBDCs) within new payment systems. CBDCs are digital forms of cash, denominated in the local currency and issued by the central bank – unlike commercial bank money, which is created when private banks make loans.

CBDCs would therefore provide fiscal benefits in the form of seigniorage revenues, that is the profits derived from issuing money, while safeguarding public money and increasing financial inclusion. In comparison to traditional payment systems, CBDCs offer further benefits in terms of reduced cost while improving security and providing instant settlement.

The current moment offers an opportunity for African countries to further develop and expand payment systems such as PAPSS in order to reduce susceptibility to the growing belligerence of US economic policy. Increasing the capabilities of Global South-led multilateral development banks, such as the New Development Bank - established by BRICS states - and African Development Bank, to provide financing in local currencies would further strengthen African currencies and provide more stable financing options than expensive dollar-denominated debt.

Together, local currency financing and increased regional trade using local currencies would significantly reduce reliance on the US and the dollar, opening up economic policy space to focus on domestic priorities rather than dollar accumulation.

We are living in an increasingly multipolar world, in which US dominance of trade and finance has been diminishing year by year. Even if building a new financial architecture is far from a simple task, Trump’s tariff tantrums are an opportunity in disguise: setting in motion a process that has long been discussed but never treated as urgent until now.

Although the local currencies of many African countries are currently reeling from the impacts of the tariffs, it is in fact the dollar that faces a long-term crisis. The erosion of its dominance could be the catalyst for a new era — one in which the voices of Africa and the wider Global South are no longer sidelined but central to reshaping the rules.

https://www.opendemocracy.net/en/5050/trumps-tariff-tantrums-boost-case-for-new-financial-architecture-in-africa

 

READ FROM TOP.

 

 

 

YOURDEMOCRACY.NET RECORDS HISTORY AS IT SHOULD BE — NOT AS THE WESTERN MEDIA WRONGLY REPORTS IT.

 

 

 

         Gus Leonisky

 

         POLITICAL CARTOONIST SINCE 1951.