This is apropos a letter to the Editor by this writer titled “The looming challenge to dollar dominance” carried by the newspaper yesterday. Let me add to what I have already said that the Shanghai Cooperation Organisation (SCO) has been actively promoting the use of national currencies in trade and investment among its member states.
In September 2022, during the Samarkand Summit, the SCO Heads of State Council approved a roadmap aimed at gradually increasing the share of national currencies in mutual settlements. For instance, on February 21, 2023, representatives from finance ministries, central banks, and financial organizations of member states met to share experiences and discuss the development of payment and clearing systems for mutual trade in national currencies. For example, over 70% of commercial transactions between China and Russia are conducted in Russian Ruble and Chinese Yuan.
In the European Union (EU), trade and investment are dominated by euro followed by the US dollar, with the euro being the primary currency for exports (49%) and the dollar leading in imports (50 percent) as of 2022. The EU’s foreign direct investment (FDI) inflows increased by USD 12.3 billion in August 2024, with inward FDI stock valued at approximately USD 3 trillion and outward stock at $4.5 trillion in 2022.
Additionally, foreign portfolio investments rose by USD 281.4 billion in June 2024. These figures underscore the euro’s prominence in EU exports and investments. Trade and investment volumes between Russia, its allies, and Eastern countries have significantly shifted toward local currencies in recent years.
In 2023, Russia’s total trade volume reached approximately USD 844 billion, with over 80 percent of its trade with China settled in Rubles and Yuan. Eastern Europe and Central Asia primarily use national currencies for regional trade, though US dollar and Euro remain prevalent for international transactions.
Investment flows, including Russia’s USD 38 billion inward FDI and USD 64 billion outward FDI in 2021, are also increasingly shifting to local currencies, reflecting a broader strategy to enhance regional economic resilience and sovereignty
Qamar Bashir
Copyright Business Recorder, 2024