Africa's Latest Move Just Caught Everyone Off Guard - No One Expected This
Africa's Latest Move Just Caught Everyone Off Guard - No One Expected This
August 16, 2024
Tech Revolution
Let’s jump into an exciting shift happening in the world of finance, particularly among developing nations. More and more countries are moving away from the U.S. dollar and embracing local currencies and gold. This trend, known as de-dollarization, is gaining momentum, and it’s all about reducing reliance on the dollar in a world where economic stability feels increasingly uncertain. For a long time, the U.S. dollar has been the heavyweight champion of global currencies. Back in 2002, it made up a whopping 72% of global reserves.
Fast forward to today, and that number has dropped to around 59%, according to the Atlantic Council. That’s a significant decline! Meanwhile, the Chinese yuan has seen its share of global reserves grow by about 3% over the last two decades, while the euro has also taken a hit, falling from 28% in 2008 to around 19% now. Maria Zakharova, who speaks for Russia’s Ministry of Foreign Affairs, pointed out how the euro’s share has dwindled over the past 16 years. With BRICS countries... Brazil, Russia, India, China, and South Africa, pushing to reduce their dependence on the dollar, it’s clear that the landscape of global finance is changing.
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So, what’s fueling this shift? A big part of it is the worries about the U.S. national debt, which has skyrocketed to a jaw-dropping $35 trillion. Many developing countries are anxious about what might happen if global markets take a dive. The BRICS nations are really stepping up here, pushing for the use of their local currencies in international trade. If this keeps going, experts are saying the dollar’s share of global reserves could drop below 50%, which could lead to some financial instability in the U.S. Now, let’s talk about Africa for a second. Countries there are seriously rethinking their financial futures. Many are turning to gold as a safe bet against geopolitical risks and currency fluctuations.
Countries like Nigeria, Uganda, Zimbabwe, and Madagascar are ramping up their gold reserves and even thinking about backing their currencies with the shiny metal. Let’s zoom in on what’s happening in Africa. Nigeria, for instance, has kicked off domestic gold-buying programs to beef up its reserves. Central Bank Governor Godwin Emefiele has pointed out that rising inflation and increasing debt levels are raising serious red flags about the stability of the U.S. economy. So, it makes total sense for Nigeria to bring its gold home and secure its financial future.
Uganda is also getting in on the gold game. The Bank of Uganda has launched a program to buy gold directly from local artisanal miners, which is a smart move to reduce risks in international financial markets. And in June, Tanzania made waves by committing $400 million to snag six tons of gold, with Finance Minister Dr. Mwigulu Nchemba leading the way to cut back on using the U.S. dollar in the country. Zimbabwe is making big moves too. Earlier this year, they introduced the ZiG (Zimbabwe Gold) currency, which is backed by gold and other foreign reserves. This is a major shift in Zimbabwe’s monetary policy and reflects a wider trend among African nations to take more control over their economic destinies.
Alright, let’s dive into the exciting world of BRICS! This group is growing, with new members like Ethiopia and Egypt joining the ranks, plus some Middle Eastern countries like Iran and Saudi Arabia are getting in on the action too. There’s a lot of buzz about creating a new global reserve currency, which could shake things up quite a bit. At the last BRICS summit in South Africa, the members decided to make the Chinese renminbi (or yuan, as most people call it) the go-to currency for trade and settlements. That’s a pretty big deal in the quest to rely less on the dollar! Right now, BRICS countries make up about 37.3% of global GDP—double what the European Union has! But here’s the catch: coming up with a unified alternative currency isn’t a walk in the park.
Dr. Richard J. Grant, a finance and economics professor, points out that while each country can promote its own currency, getting everyone to agree on a collective alternative to the dollar is a whole different ballgame. Geopolitical tensions are definitely pushing this agenda. Take U.S. sanctions against Russia, for example. Sergey Lavrov, Russia's Foreign Minister, recently mentioned that a whopping 90% of trade with China is now happening in local currencies. That’s a clear sign that countries are trying to move away from dollar dependence.
Original: https://youtu.be/dO4q6VIG0Y4
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