NAIROBI, Sept. 7 (Xinhua) -- The Common Market for Eastern and Southern Africa (COMESA) on Friday decried the low use of regional payment and settlement system for intra-regional trade.
COMESA clearing house executive secretary Mahmood Mansoor told Xinhua in Nairobi that the payment for the bulk of the 8 billion U.S. dollars in intra-COMESA annual imports is conducted through correspondent banks in the United States and Europe.
"As a result, the region pays transaction fees of up to 400 million dollars to foreign banks annually due to lack of use of the regional payment and settlement system," Mansoor said.
Currently, 21 African countries in East, South and North Africa are COMESA member states.
The COMESA clearing house has been operating a regional payment system for the past five years that allows member states' central banks to guarantee payment for intra-COMESA trade and thereby eliminate the need for use of correspondent banks outside the region.
Mansoor said only 5 million dollars of COMESA imports is conducted through the COMESA clearing house every year.
Intra-regional trade remains expensive as traders involved prefer to use letters of credit, which attract a 5 percent transaction fee, he said.
"Through the COMESA Clearing House, traders don't have to use letters of credit and hence it results in lower cost of trade," he added.
The COMESA official noted that most of the bloc's member states have liberalized their economies and therefore central banks cannot dictate how payments for cross-border trade are conducted.
The regional bloc plans to roll out a sensitization campaign to increase the use of the cost-effective regional payment and settlement system.
