The International Monetary Fund (IMF) commonly called the World Bank, confirmed that the US dollar is in jeopardy against BRICS nations and other local currencies. The IMF took into consideration the de-dollarization agenda initiated by BRICS to uproot the US dollar from the world’s reserve currency status.
The threat from BRICS and other local currencies against the US dollar is real and should be taken seriously, acknowledged IMF. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade.
Also Read: BRICS: Rift Between Old & New Members Grow
US Dollar: IMF Acknowledges Threats From BRICS & Local Currencies
The Deputy Managing Director of IMF Gita Gopinath acknowledged in her paper titled, ‘Impact of Geopolitics on International Trade and the Dollar’ stating that BRICS is creating a shift in global economic policies.
The IMF MD revealed that BRICS nations are now conducting business based on their geopolitical alliances with other countries. The development puts the US dollar on the back foot as local currencies will be used to settle cross-border transactions.
Also Read: Top U.S. Bank Warns BRICS, Says the Dollar Cannot Be Replaced
“Countries (BRICS) are reassessing their trading partners based on their economic and security concerns,” said IMF’s Gopinath. “Foreign investment flows are also being redirected according to geopolitical alliances. Some countries are reevaluating their heavy dependence on the dollar in their international transactions and reserves,” she said.
However, she said that despite the risk, the US dollar remains the de facto currency for global trade and commerce. “Probably because a large part of commodity trade continues to be invoiced and settled in US dollars,” she said.
Also Read: BRICS Ditches US Dollar, Settles $4 Billion Trade in Local Currencies
However, if BRICS captures the oil sector and settles trade in local currencies, the US dollar could decline. The majority of new countries that joined BRICS this year are oil-producing and exporting nations. The alliance is waiting for Saudi Arabia to join the bloc and change the dynamics in the global oil sector.