Of late, de-dollarization seemed to have become a buzzword, especially after the imposition of Western economic sanctions on Russia after the launch of Moscow's special military operation in Ukraine in February 2022.
With the West's unilateral embargo on Russian goods posing great challenges to the global economy, especially to developing sovereign states like India, governments of several countries signed agreements to sell/purchase items in national currencies.
What is an Example of De-dollarization?
Moscow and New Delhi were among the first strategic partners to ink a deal for Rupee-Rouble trade as the latter's imports of crude from the former surged to record levels.
Plus, the government of Indian Prime Minister Narendra Modi expanded its financial cooperation with Russia, securing large quantities of fertilizers from the Eurasian nation.
The overall value of Indian imports from Russia reached $36 billion, with crude and fertilizers accounting for the majority of that figure.
Furthermore, according to the deputy chairman of Sberbank, trade settlements in local currencies between the two countries have seen a fivefold year-on-year growth.
An Indian rickshaw driver rides past a foreign currency exchange shop in New Delhi, India,Thursday, Aug. 22, 2013.
© AP Photo / Tsering Topgyal
"Sberbank is the key bank partner for the corporate clients who are working in national currencies with India. This year the volumes of settlements with India have grown five times in monetary terms compared to the same period last year", Popov said on the sidelines of a public event in India last month.
What Are the Effects of the Dollar Losing its Dominance?
As per a recent report published by the International Monetary Fund (IMF), the US dollar's share in international forex reserves stands at 58.35 percent at present.
Interestingly, this is the greenback's lowest level since the current financial system came into being following the end of the Second World War.
In the seventies, the US dollar had a commanding position within global foreign currencies as it had an 85 percent contribution to the forex reserves of the world.
Yet the US dollar remains the most powerful currency on the planet as the second-most used currency in the world is the Euro, which has a 20 percent share in international forex reserves.
On the other hand, Japan's Yen and Chinese renminbi have 5 and 2.7 percent representation in this.
One hundred rubles
© AP Photo / Martin Meissner
What Happens If US Dollar Loses Reserve Status
In case the US dollar ceases to be the main reserve currency due to the efforts made by emerging economies like Russia, China, India, and other developing nations like the ASEAN group of countries and South Asian sovereign states, including Bangladesh, the American currency could find itself in a freefall.
In economic terms, a freefall is used to describe a situation where a currency is fast losing ground when being pitted against the other.
For instance, between May 2022 to August 2023, the Pakistan Rupee (PKR) depreciated by as much as 33 percent.
Notably, the value of one US dollar was worth PKR 200 in May 2022 which suffered a catastrophic drop in the following 15 months, with the worth of a single American dollar being PKR 300 in August 2023.