The push for de-dollarization led by the BRICS group continues to gather momentum as Bangladesh, India, and Indonesia look to move away from the United States dollar for trade and financial transactions.
“India and Bangladesh are moving away from using the U.S. dollar in bilateral trade, the Bangladesh-based news website The Business Standard reported this week.
According to the report, the two countries have reached a deal that will see a part of trade transactions carried out in their respective domestic currencies, the rupee and the taka. New Delhi and Dhaka have reportedly been discussing the step for months.
However, they are not planning to ditch the dollar from trade completely, the news outlet noted. It is expected that exports from Bangladesh to India, which were about $2 billion in 2022, will be fully switched to rupees and takas, while $2 billion worth of Indian exports to Bangladesh (out of roughly $13.69 billion as of the previous fiscal year) will be paid for in rupees. The rest will continue to be paid in dollars, the news outlet states.
In order to facilitate the transactions, two of Bangladesh’s banks, Sonali Bank and Eastern Bank, will open accounts with two Indian lenders, the State Bank of India (SBI) and ICICI Bank, and vice versa. Afzal Karim, CEO and managing director of Sonali Bank, told the news outlet that more banks from both countries will also gradually join the process. He noted that switching to domestic currencies in bilateral trade will help each country reduce pressure on its U.S. dollar holdings.
According to Bangladesh-India Chamber of Commerce and Industry president Abdul Matlub Ahmad, who was cited in the report, there are still some procedural issues in switching from the U.S. dollar to domestic currencies in trade. He noted, however, that businesses have for some time been calling on the central banks of the two nations to allow the switch and welcome the decision.
‘The procedural steps are being taken care of. However, it may take several months for [transactions] in taka and rupee to start’, Matlub Ahmad added.
Earlier this month, India unveiled its new Foreign Trade Policy for 2023, whose centerpiece is shifting away from the dollar and boosting the use of the rupee in foreign trade. The country also recently agreed on a switch to rupee-payment mechanisms for Iranian crude imports and trade with Malaysia. Overall, India currently has rupee trade mechanisms with 18 countries, including Russia”. -RT
Among the most populous countries in the world, India and Bangladesh are respectively ranked second and eighth.
In addition, the fourth largest populated country in the world and the largest Muslim nation on the planet
“Indonesia is following the lead of the BRICS group in its policy of shifting away from the U.S. dollar in trade and financial transactions, according to the country’s central bank.
Jakarta has introduced transactions in the local currency to settle cross-border trades, the portal SINDOnews has reported, citing Bank of Indonesia Governor Perry Warjiyo.
‘Indonesia has initiated diversification of the use of currency in the form of LCT [local currency trading]. The direction is the same as the BRICS. In fact, Indonesia is more concrete’, Warjiyo said on Friday, addressing a press conference with the board of governors meeting.
Indonesia has already implemented the practice with a number of countries, such as Thailand, Malaysia, China, and Japan, he added. It also plans to sign a cooperation agreement with South Korea regarding local currency trading in early May.
Warjiyo’s statement comes as the BRICS economic bloc – comprising Brazil, Russia, India, China, and South Africa – claims to be working on establishing a joint payment network to cut reliance on the Western financial system, and on the dollar in particular. The member countries have been increasing the use of local currencies in mutual trade and also working on establishing a new reserve currency.
Last month, Brazil and China signed an agreement to trade in their own currencies, thus abandoning the greenback as an intermediary.
China’s attempts to ditch the dollar in international trade have intensified against the backdrop of the sweeping sanctions introduced by Western nations against Russia, a major global energy producer and exporter. Indian policymakers have also taken several steps towards shifting away from the greenback to rubles and rupees in mutual trade with Moscow.
Russia began de-dollarizing its economy in 2014 when the West introduced the first round of sanctions against the country over Crimea. Moscow has been boosting the use of alternative currencies in transactions since last year, with President Vladimir Putin suggesting earlier that the Chinese yuan should be used more widely, not only in trade with China, but also in Russia’s transactions with countries in Africa and Latin America. The latest data from the Bank of Russia shows that the yuan has become a major player in Russia’s foreign trade”. -RT
United States Treasury Secretary Janet Yellen has admitted that economic sanctions used against countries by the United States have put the dollar's dominance at risk as governments all across the world have been seeking to find alternative payment systems.
While the United States might have achieved success in using its financial hegemony as a weapon by disrupting smaller economies to accomplish what it wants without needing to launch an entire military campaign, the long-term consequences of this sort of financial warfare will inevitably hurt the American economy by ending the dollar’s special reserve status much sooner than was previously expected.