African central bank governors meeting in Tanzania say the adoption of the Yuan by the International Monetary Fund (IMF) in its basket of currencies will lead to the Chinese currency playing a major role in international financial markets.
Economic experts from various African countries attending the forum of central bank governors from eastern and southern Africa also believe that the adoption of the Yuan was an important milestone in the integration of the Chinese economy into African financial systems.
The IMF has adopted the yuan as part of its Special Drawing Rights (SDR) basket of currencies.
“Tanzania is not left behind, already the Bank of Tanzania’s five per cent of foreign currency reserve is being held in Renminbi,” Tanzania’s Central Bank Governor Beno Ndulu told the forum, which was facilitated by the Macro-economic and Financial Management Institute of Eastern and Southern Africa (MEFMI).
Ndulu said the adoption of the Yuan was a reminder that Africa should start giving the Renminbi due consideration as a reserve, investment and settlement currency given China’s deepening engagement with the continent.
He said the decision by the IMF reflected major shifts in the global economy and was a recognition of China’s progress over the last few decades in moving towards a more open and market-based economy.
The governor said China was playing an increasingly prominent role in the global economy and it was entirely logical that its currency should also play a role in international financial markets.
On the benefits of using the Chinese currency, Ndulu said it was more profitable to transact bonds using the Yuan than the euro and the US dollar because the Chinese currency was stable.
The Yuan is the sixth currency to join the US dollar, Swiss Franc, the Euro, the Japanese yen and the British pound in the basket of currencies that make up the SDRs.
Caleb Fundanga, the MEFMI Executive Director, said there was a need for the region to put in place supportive measures to encourage use of the Yuan amid growing global demand for the currency.
“Greater usage of the currency in bilateral transactions will provide further impetus for trade and investments links between China and the region resulting in benefits for both sides,” he said.
Africa has been the leading aid recipient from China.
Source: Nam News Network