IMF says several countries’ dependence on dollar decreases

Several countries are working to reduce their dependence on the US dollar due to disruptions caused by the COVID-19 pandemic and the war in Ukraine, as well as national security concerns, First Deputy Managing Director of the International Monetary Fund (IMF) Gita Gopinath said at Stanford Institute for Economic Policy Research, Report informs.

“After years of shocks—including the COVID-19 pandemic and Russia’s invasion of Ukraine—countries are reevaluating their trading partners based on economic and national security concerns. Foreign direct investment flows are also being re-directed along geopolitical lines. Some countries are reevaluating their heavy reliance on the dollar in their international transactions and reserve holdings,” she noted.

“Despite increased geopolitical risks, the latest data show that the US dollar remains dominant. According to SWIFT, it accounts for over 80 percent of trade finance, likely because much of commodity trade continues to be invoiced and settled in dollars.

It also accounts for nearly 60 percent of FX reserves despite the gradual diversification of FX reserves away from the dollar and partly into non-traditional reserve currencies such as the Australian dollar, and the Canadian dollar.”