2023-06-07 05:42:01
The hegemony of the US dollar in international trade and international financial and banking circuits is withering, with China and Russia the privileged position of the greenback is increasingly challenged by the rise of the BRICS countries including China, which has the second largest economy in the world and has succeeded in making its currency the yuan an alternative to international commercial transactions, especially with its Asian and African partners.
The wind of de-dollarization is accelerating with the war in Ukraine and the change in the epicenter of the world economy with the rise of China and the Gulf countries and of course the decline of South America. northern and western Europe.
The US dollar dominates all components of global finance. Nearly 60% of central bank foreign exchange reserves around the world, mostly earmarked funds for bad times, are invested in dollar-denominated assets. All commodity contracts, including oil and raw materials, are billed and settled in dollars. The dollar is used to denominate and settle a majority of international financial transactions, and it is absolutely convertible once morest any other currency on the planet. The dollar thus confers on the first economy of the world which weighs 30% of the world GDP an unprecedented weight and influence in modern history. Unfortunately with its limitless debt and its excessive use of money printing, the country of Uncle Sam often enjoys it without regard to the concerns of the rest of the world.
And today Africa is suffering as US interest rates have prompted investors to abandon our continent in favor of US Treasury bonds, which are both safer and more profitable. Most currencies in Africa, especially those of Nigeria and Ghana, have lost value once morest the dollar, which is accentuating inflationary pressures on the continent in a context of soaring import prices. Combined with a slowdown in growth, this situation places our States facing a difficult arbitration between the fight once morest inflation and the option of economic recovery for our countries in a very fragile post-covid context for the countries of the continent.
Added to this squaring of the circle is the continent’s debt, which is exploding with interest rates aligned with those of the American bond market.
About 40% of the public debt is external in sub-Saharan Africa and more than 60% of this debt is denominated in dollars for our countries overexposed to the greenback. Since the start of the pandemic, exchange rate depreciations have increased the public debt of countries in the region by around 10 percentage points of GDP on average at the end of 2022, on equal terms. Growth and inflation (which reduces the real value of existing debts) helped contain the increase in public debt to around 6% of GDP over the same period. In the event of persistent external shocks, countries whose exchange rates are not pegged (such as the franc zone) to a currency have little choice but to let the exchange rate adjust and thus tighten monetary policy to curb inflation. The risk is to starve and impoverish the populations, hence the political instability everywhere in Africa.
Today the perspective of the loss of ground of the US dollar gives us the opportunity to rethink the alternatives including crypto-currencies if our central banks dare to come out of colonial and Western schemes and software. A single currency in Africa for the zlecaf would be the panacea.
Also let us avoid with the Sino-Asian influence that a dominance of the evanescent greenback is replaced by a Chinese yuan which is already advancing its pawns on the continent. So let’s avoid the Chinese trap following the US greenback trap.
What if IMF SDRs were not expressed in US dollars but in yuan, renminbi and naira?
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Moustapha DIAKHATE
Ex Cons. PM Special
Cons. Et Expert Infrastructure
1686125171
#greenback #loses #throne #Moustapha #DIAKHATE
