US$ losing dominance in international business

Mahfuja Mukul: The dominance of the dollar in world trade transactions is waning. The dollar’s share of global reserves is also declining. As the value of the dollar rose sharply, import costs and external liabilities of many countries increased. In this situation, many countries are now trying to use alternative currencies in foreign trade. Bangladesh has also taken the initiative of using alternative currencies in some areas of global transactions.
In this, foreign trade with that country has started in limited form in Indian currency rupees. Although the central banks of the two countries have approved the opening of LCs in the Chinese currency Yuan to trade with that country, no LCs have been opened in that currency so far.
According to sources, the International Monetary Fund (IMF) has so far recognized the currencies of five countries as stable currencies. These are the US Dollar, the British Pound, the European Union Euro, the Japanese Yen and the Chinese Yuan. Among them, the US dollar, the British pound, and the Euro, the currency of the European region, are more active in international trade. Chinese and Japanese currencies do not circulate outside of that country. That’s why these two currencies could not move in global trade after the IMF’s recognition.
In 2019, the central bank approved the opening of LCs in Chinese currency, but no LCs have been opened in this currency so far. Because the yuan does not move to any country other than China. As a result, there is no opportunity to use that currency in any country other than China by exporting to China in yuan. That is why exporters are not opening LCs in Chinese currency. Besides, there is a huge trade deficit between the two countries.
According to data from the central bank, 14 billion yuan of goods were imported from China in the fiscal year 2021-22. In contrast, exports were 406 million yuan. As a result, Bangladesh does not have enough yuan to import from China in that currency. Still, to trade in yuan, you have to buy yuan with dollars. Which will further increase the cost of foreign trade.
The same will be the case with the Indian currency Rupee. Bangladesh imports about Tk 109,000 crores worth of goods from India annually. Against this, exports to India amount to Rs. 12,000 crores. As a result, there is a huge gap between import and export. Bangladesh does not have enough rupees to meet the import liability of such a huge amount. Due to this, it was decided that for the time being, the amount of exports to India will be in Rupee. Goods will be imported from India with that Rupee. According to this, the trade of Tk 12 thousand crore between the two countries will be in local currency. This will also be a problem for those who are going to India as tourists or for medical treatment from Bangladesh, many of them carry Rupee. Then they will fall into a crisis of Rupee. They will be forced to take dollars. This will increase the pressure on the dollar.
Besides, the exporters who export to India have to spend it in India if they bring the price in rupees. Can’t be done anywhere else. But the business needs of an exporter require dealing in different countries. Raw materials for export are often imported from other countries instead of from India. In this case too the exporter will be in trouble. In case of import of raw materials from other countries he has to open LC in dollars. Then you have to sell rupees and buy dollars. It will increase the cost. Because of this, exporters will not be interested in pricing the product in Rupee.
In 2020, Bangladesh Bank started surveying the issue of trading with the Russian currency in rubles. But it’s not over yet. Economic sanctions were imposed on the country after Russia invaded Ukraine in February last year. As a result, Russia is now unable to trade in dollars. Most transactions are in Chinese currency. Bangladesh has not been successful in dealing with Russia in Chinese currency. Because the central bank does not have enough currency.
Meanwhile, entrepreneurs of the industrial sector said that since Bangladesh is an import-dependent country, benefits will be obtained if alternative currencies are used for imports. Cost will decrease. 40 percent of Bangladesh’s total imports are from India and China. But exports less. Besides, the value of these two currencies against the dollar has also decreased more than the rupee in the last one year. The rupee depreciated by 26 percent, the Indian rupee depreciated by 32 percent, and the Chinese currency depreciated by 28 percent. Due to these reasons exporters of the country are not interested in opening LCs in local currency other than dollar.
Globally, including Bangladesh, the increase in the dollar has increased the cost of imports. Importing goods in other currencies instead of dollars will reduce costs. It will save on foreign transactions. Due to this, transactions in other currencies are encouraged instead of dollars. But it was not successful as no currency could stand as an alternative to the dollar.
However, due to geopolitical reasons, many countries are now looking for an alternative currency to the dollar. China has come a long way in this regard. They are trading in alternative currencies with Russia, Iran, India. Settlement of transactions in Chinese currency outside of its own import and export.
Dollar is the major foreign exchange currency of India. But the country is doing transactions with Japan in their own currencies. In this, the transactions that are outstanding at the end of the year, are adjusted to the next year. South Korea also trades with other countries in its own currency. Through this, they continue to try to protect their economy from the heat of the dollar.
Meanwhile BRICS Bank has taken the initiative to launch its own currency. It currently has 8 countries. Another 19 countries are in the process of joining.
In 2001, the share of the dollar in the world’s reserve currency system was 73 percent, after the imposition of sanctions on Russia, this rate has further decreased to 58 percent.