WHAT DOES IT MEAN FOR AFRICA IF THE VALUE OF THE DOLLAR DROPS

The dollar has had a turbulent couple of weeks, after reports came out that Russia will stop trading using the US dollar, experts thought that the worst is over. But after the world’s second-largest economy, China joined Russia, economists started fearing for the worst. The impact of such a deal poses a great threat not only to the United States but also Africa.

In order to facilitate international trade, the USD is presently the preeminent reserve currency, held by many nations in their central banks. The USD’s value could decrease if other nations ceased using it, which would reduce demand for it. Being the world’s reserve currency, the USD makes it comparatively simple for the US to borrow money from other nations. The United States would find it more difficult to acquire money if the USD wasn’t the world’s reserve currency, and trade imbalances might develop.

Many commodities are presently priced in USD, which is the primary currency used in international trade. International commerce may become more challenging and pricey if different currencies are used. A weaker USD would result in higher purchase prices since many African nations depend on imports. Consumer prices could increase as a result, which could be particularly challenging for families with low incomes.

A weaker USD, however, might boost African products’ competitiveness on the world market because foreign consumers would pay less for them. African exports may see a rise in demand as a result, which would be beneficial for the continent’s economy.

Overall, the effects of a weaker USD on Africa would be dependent on a number of variables, including the particular countries involved, the level of economic integration with the United States, and the nature of their economic relationships with other nations.

At the time of writing, India has also announced that it will stop trading using the dollar.