Saher LiaqatandAbu Hurrairah Abbasi

Macroscope | In a multipolar world, the US dollar’s fall from prominence looks likely

De-dollarisation is gaining momentum as more countries voice concerns about the US currency’s dominance in the global financial system and its use as a tool for exerting influence

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Argentine Economy Minister Sergio Massa and Chinese ambassador Zou Xiaoli shake hands after signing a currency swap agreement in Buenos Aires on April 26. Argentina joins a growing group of countries paying for Chinese imports in yuan, rather then the dollar. Photo: Argentina’s Economy Ministry/AFP

Saher LiaqatandAbu Hurrairah Abbasi

Published: 12:30pm, 8 May 2023

In recent years, the world has witnessed fierce US-China rivalry, the Covid-19 pandemic wreaking havoc on global systems and the fallout from the Ukraine war on supply chains, as well as an acceleration towards multipolarity, where power is more evenly distributed among several advanced economies.

The transformation of China, a trusted economic partner to many countries, into a mediator of global importance is just one example of the move away from a unipolar world. This is coupled with de-dollarisation gaining momentum.

More countries are voicing concern about the US dollar’s dominance of the global financial system and its use as a tool for exerting influence.

A World Gold Council survey revealed that many central banks, particularly those in developing and emerging markets, are seeking to boost their gold reserves. According to the International Monetary Fund, the share of the dollar in the world’s official foreign exchange reserves has fallen from 71 per cent in 1999 to 58 per cent at the end of last year.

In June last year, Russian President Vladimir Putin said the BRICS grouping – Brazil, Russia, India, China and South Africa – is collaborating on creating its own currency. Brazilian President Luiz Inacio Lula da Silva expressed support for the idea. Meanwhile, China is developing its interbank payment system as an alternative to the Western-controlled Swift system.

The United States’ fractious ties with many nations have inadvertently bolstered China’s global prominence. In March 2020, eight countries issued a joint letter to the secretary general of the United Nations calling for an end to sanctions. The gulf between the Western powers and their allies – led by the US, European Union and Japan – and the Eastern powers led by China and Russia has widened due to sanctions related to the Ukraine war.