Lately, we have been hearing and reading a lot about de-dollarization. At first contact, this term seems technical, complex, and perhaps difficult to understand. One wonders how de-dollarisation occurs amid the prolonged hegemony of the US dollar in international trade and financial transactions, from the 1970s and the decoupling of national currencies from the gold standard to the present day. The dollar dominates financial transactions, the reserves of many central banks, international loans, government bonds, insurance derivatives, and commercial currency. De-dollarization is closely related to the member countries of the BRICS organization.
If one follows the current inflation rates in Zimbabwe, one surely remembers the famous one-million notes that were in circulation, which were not even enough to buy basic goods. They had almost no marketable value. Zimbabwe recently issued a new currency from its central bank, the ZiG, which is linked to the country’s gold reserves. It is also associated with mineral and diamond resources whose value can be expressed in gold. This new monetary policy is a desperate attempt to finally tame the inflation monster in this country. But why is this development important? Because this move signals a coping strategy by an African country as a defense against the dollar, which is still used by the majority of the population even though it has been rapidly devalued in recent years.
Zimbabwe aims to achieve independence from the use of the dollar amid its hyper-inflationary economic environment. This widely known de-dollarization, which is taking place in various countries around the world, is gradually being promoted by the BRICS countries through their political and economic agenda. While Western analysts and international economic organizations such as the IMF may stress that the sustainable path for countries such as Zimbabwe, Argentina, and others is to fix their economies, exercise fiscal discipline, reduce public debt, and lower government deficits, it is observed that various national governments have taken drastic actions to return to a regime of regulated economy in terms of the fixed exchange rate of their national currencies. Zimbabwe has already applied to become a member of the BRICS Development Bank, which is a major step before full integration into the Russia-China-led organization.
From the great deregulation and liberalization that took place in the world after the collapse of the Bretton Woods system, we see that the BRICS bloc of countries wants to reduce the hegemony of the US dollar, which is still estimated at around 60% of international transactions and trade. Their strength lies in the fact that collectively the BRICS countries, both in their population and their GDP, constitute a very significant percentage: 25% of the world’s GDP and about 40% of the world’s population respectively. They are considering promoting their own currencies or planning to launch a new alternative global currency in the next few years to serve their own bloc of countries in their transactions. This would change the global financial architecture. It is worth mentioning that China already uses the renminbi as an official currency in its exports to third countries. In other words, the countries with which it trades choose the renminbi over the dollar.
Countries with weak national currencies that are directly affected by the fluctuation of the dollar are most likely to advance towards joining the BRICS organization. The BRICS bloc targets emerging countries that express interest in joining, looking to the huge consumer market created by all these economies, as a counterweight to the perennial hegemony of the dollar in world trade, capital markets, and international loans. It is not out of the question for the BRICS bloc to create a new currency that will boost their economies without creating inflationary pressures on their internal markets. By establishing this new currency, they will be able to further their geopolitical agenda as well as their growing influence both locally and globally through foreign direct investment in third countries.
Patterns of production, trade, and supply chains have all changed since the pandemic. Brazil, Russia, China, India, and South Africa may see this as a historically significant moment to establish a change in the status quo of US dollar power on the global geopolitical chessboard. The trap of inflation in Western economies has created an imbalance in the current account balance. For example, imports in America exceed exports, resulting in increased public debt with the flight of dollars as a currency for the payments of countries from which it imports, like China. Brazil has also increased its exports due to the war in Ukraine, just as India is now an important trading partner of Europe and America. As the trade surplus of these countries with the West increases, the BRICS organization will increase its membership and move closer to the vision of creating a new parallel currency in international trade and transactions, without completely displacing the dollar. It is important to remember that US bonds are still considered the safest assets in the world, something that feeds the strength of the dollar in the global financial firmament.
The international political scene must monitor the developments happening in countries such as Nigeria and Zimbabwe. Organizations such as the International Monetary Fund and central banks in Europe and America should support the fiscal restructuring of these countries before they resort to monetary strategies and policies that essentially strengthen the bloc of countries moving competitively and with dubious geopolitical visions towards Europe and America.
-Efstathios Kassios
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EFSTATHIOS KASSIOS 
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