The BRICS alliance is advancing de-dollarization efforts by using local currencies for international trade settlements. Developing countries are looking to distance themselves from the dollar and promote their native currencies instead. Challenging the US dollar’s global reserve status comes with risks, as the greenback controls the majority of global transactions. Undoing the dollar could also bring developing countries to their knees, as the USD is the strongest currency in the markets.
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Evaluating the risks of de-dollarization, Zimbabwe’s former Finance Minister Tendai Biti warned the BRICS that undoing the US dollar leads to economic disaster. The comment comes at a time when Zimbabwe’s President Emmerson Mnangagwa requested to join the BRICS-funded New Development Bank’.
BRICS De-Dollarization Efforts Could Lead To Economic Disaster
Biti warned President Mnangagwa that if Zimbabwe blindly followed BRICS in de-dollarization, the country could plunge into financial turmoil. He stressed that de-dollarization will lead to a “disaster” that could take years to undo the damage in the economy.
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“The regime is intent on de-dollarization. This move will be an absolute disaster and will cost workers and pensioners,” said Biti. He warned that “Conditions for de-dollarization don’t exist,” and local currencies dominating the world are a figment of imagination.
The Zimbabwean dollar is plagued with volatility and remains fragile in the international markets. The currency uses a multi-currency system which is anchored by the much-preferred US dollar. Therefore, the hook that’s keeping the Zimbabwean dollar from crashing is the US dollar. Undoing this could lead to an economic collapse and de-dollarization is not the best suitable idea for Zimbabwe.
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However, other BRICS members have a robust economy and could sustain their economies through de-dollarization. Africa, on the other hand, needs to tread carefully as their economies have not reached the self-reliant stages yet. In conclusion, the de-dollarization efforts could boomerang and hurt the Zimbabwean economy more than the other way around.