African countries discuss using RMB as reserve currency
Seventeen top central bankers and government officials have met at a forum held by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa or MEFMI, an intra-governmental organization of fourteen eastern and southern African nations.
High on the agenda has been the discussion on the use of the renminbi as a reserve currency for the region.
MEFMI Executive Director Caleb Fundanga says it's necessary to use the yuan as a reserve currency as China is Africa's largest trading partner and the bilateral relationship is gaining momentum.
"The general conclusion is that we should use the yuan more because its time has come. We are doing more business (with China) so it's natural that we use the currency of the country with which we are trading. Just the way we have been using the (U.S.) dollar and the Euro, we want to use the Chinese currency more in our transactions because it is to our benefit."
Fundanga suggests the use of the yuan can protect the region against currency volatility and reduce exchange loss.
He also says as China is providing financing for African infrastructure projects and some of them come as loans, it's convenient to repay the loans with the yuan.
"One of the issues we discussed though was that sometimes if you have borrowed from China they want to bill you in U.S. dollars. Now we are saying our government must start discussing with Chinese enterprises (and) government so that we're billed in yuan and then we can pay in yuan. Because there is no point if we start keeping our reserves in yuan but we're billed in dollars. It is no good."
Fundanga admits challenges exist and a lot needs to be done in order to take advantage of the new situation as the importance of yuan is increasing every day.
"I think what we need to do is more information about who is active in the yuan market. If we put the yuan as a reserve currency, we have to invest it. We can't just pack it in a room. So in order to invest the Chinese currency, you need to know the products that you can invest your money. Also the returns. What percentage do you get by investing yuan?"
The organization is planning to invite Chinese experts to attend future discussions, pushing for the drive to take the Chinese Yuan as a reserve currency.
The institute is working closely with the ministries of finance and central banks in the two regions, providing them with financial advice.
For CRI, I'm Gao Junya reporting from Harare Zimbabwe.