The world is moving towards de-dollarization by making local currencies the first choice of payment. The US dollar is receiving stiff competition from developing countries looking to cut ties with the greenback. The battle to uproot the USD from the world’s currency has begun, and the first step is to de-dollarize their economies. The central banks of developing countries are diversifying their reserves by adding gold and other currencies to their kitty.
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The goal is to slowly yet steadily end dependency on the US dollar and boost the de-dollarization agenda. However, there are difficulties in making the de-dollarization initiative a reality, as the US dollar is a stronger force to reckon with. It’s arduous to dethrone the greenback as its roots are placed worldwide for all financial transactions. This article will highlight the top three difficulties in achieving the de-dollarization agenda.
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Top 3 Difficulties of Making De-Dollarization a Reality
Developing countries lack the main ingredient to make de-dollarization a success; the ingredient is unity. Emerging economies around the world are not geographically united like the European Union (EU). While the EU countries share borders and similar cultures and values, developing nations are divided and not like-minded.
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In addition, they are also involved in trade tussles and always aim to outdo each other on the global stage. Take for example India and China, both the countries unite as one during summits, but sling mud at each other at national levels. Their border dispute is unending, and they hesitate to use each other’s currencies for trade and commerce. Therefore, de-dollarization is nothing but a distant dream as developing countries share no like-mindedness.
Below are the three main reasons why the process of leaving the dollar behind could fail in the coming years:
- The value of local currencies is minimal and barely spikes in value like the US dollar.
- Local currencies don’t have the bandwidth and the reach that the US dollar commands globally.
- The Chinese yuan and other local currencies cannot withstand the whiplash of the Forex market like the US dollar does.
