Venezuela Plans To Abandon U.S. Dollar To Free Economy From Sanctions

sanction venezuela
Illustration by Nathaniel St. Clair

Venezuela is planning to shift away from the U.S. dollar in cross-border transactions, President Nicolas Maduro said earlier this week, claiming that the measure would help the Bolivarian Republic to free its economy.

Maduro said on Tuesday in an interview with local media: this is the path of Venezuela and the path of a fee economy where currencies are not used to punish countries and impose sanctions.”

Venezuela is the latest country to publicly share plans to reduce its reliance on the U.S. dollar. Similar measures have recently been announced by Argentina, Brazil and Iraq. Meanwhile, the BRICS group of nations is considering the introduction of a new reserve currency to replace the dollar.

Venezuela is ranked among the world’s five most-sanctioned nations. The South American country has suffered one of the largest economic contractions in history. Last year, Washington allowed U.S. energy major Chevron to resume limited oil production in the country, but the majority of sanctions remain in place and continue to weigh on the Venezuelan economy.

Longstanding sanctions policies pursued by the White House, along with rising inflation in the U.S., have forced multiple countries around the world to start looking for alternatives to the dollar.

Earlier this month, Argentinian President Alberto Fernandez and his Brazilian counterpart, Luiz Inacio Lula da Silva, agreed to develop a framework for using national currencies in mutual transactions.

Last month, Argentina confirmed settlements for Chinese imports in yuan rather than U.S. dollars in an attempt to safeguard the nation’s decreasing reserves. In March, China and Brazil agreed to abandon the greenback in their bilateral transactions in a bid to reduce investment costs and develop economic ties between the two countries. In February, Iraq’s central bank said it would allow commerce with China to be settled directly in yuan for the first time.

Earlier this year, the yuan overtook the US dollar in China’s international trade transactions.

Dollar Being Gradually Abandoned, Says IMF Chief

An earlier media report said:

The managing director of the International Monetary Fund (IMF) has said the U.S. dollar is gradually losing its status as the world’s main reserve currency.

Speaking on Monday, Kristalina Georgieva noted that there is no viable alternative among global currencies to replace the greenback in the near future.

“There have been gradual shift away from the dollar, it was 70% of reserves, now it is slightly under 60%,” Georgieva stated at the 2023 Milken Institute Global Conference in Beverly Hills, California.

According to the IMF chief, the euro can be viewed as the biggest competitor to the U.S. dollar, while the British pound, the Japanese yen and the Chinese yuan “play a very modest role.”

She stressed that the leading factor for trust in the currency of this or that country is the strength of its economy and the depth of its capital markets.

Georgieva highlighted the major shocks of the past few years – the Covid pandemic, the Russia-Ukraine conflict and the spike in interest rates after years of loose monetary policy – calling them “a series of unthinkable events.”

She explained that the rapid transition from low to high interest rates has exposed vulnerabilities in the financial sector, and that the high exposure of the U.S. banking sector to the crisis has come as a surprise to IMF analysts.

 

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