BRICS countries India and China agreed in the latest trade deal to use local currencies for import settlement with Maldives and not the US dollar. Maldives said on Wednesday that both India and China have agreed to pay 50% of all imports in local currencies.
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The new $1.5 billion import bill by Maldives will see BRICS members India and China settle 50% in local currencies. Therefore, $750 million worth of cross-border transactions will be paid by two BRICS members in local currencies sidelining the US dollar.
Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade. Maldives imports $720 billion worth of goods from China and also imports $780 billion every year from India. Half of all these transactions will soon be settled in the Chinese yuan ending reliance on the US dollar.
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BRICS: Imports Trade Being Settled in Local Currencies, US Dollar Gets Sidelined
Maldives’ Economic Development Minister Mohamed Saeed confirmed the development that the Chinese yuan will be used for import trade. The move falls in line with the BRICS de-dollarization agenda to push the US dollar below local currencies for transactions.
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“If we can arrange up to $300 million from each (BRICS) country, that means $700 million. This means we can eliminate the reliance on US dollars by that amount in the future. That will reduce the demand for dollars. And the future demand for dollars will continue to fall,” Saeed said.
“Maldives imports between $600-700 million in commodities from both (BRICS members) India and China, each year. Therefore, we import around $1.4 billion to $1.5 billion in commodities annually, from both markets combined,” he said.
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Maldives also confirmed that they are negotiating with both the BRICS members to use Maldivian Rufiyaa for trade settlements. However, the talks are in the initial phases and need more rounds of diplomatic discussions to move forward. In conclusion, the de-dollarization initiative gained steam and the US dollar is at risk from BRICS while local currencies thrive.