Bangladesh is one of the top 10 countries among the most populous (8th) countries of the world according to its consensus in 2022. But it is placed at 34th position according to its GDP. Worldometer chart Currently, it is facing a tremendous downtrend in the economy due to corruption and political instability. Its foreign reserve is decreasing more quickly than expected. It is already in the process of taking a loan from the IMF but that can not save the ass as it needs too much import every day. So, Bangladesh wants to get rid of its dollar reserve crisis, which could result in a geopolitical currency shift in turn that can contribute to the de-dollarization process.
Bangladesh, which depends on the US dollar a lot for trade with other countries. As the country's foreign funds fall below $13 billion by some media reports and the dollar's strength is called into question, it is looking for other ways to solve its problems. The Reserve Bank of Bangladesh, Bangladesh Bank is forecasting the reserve to be at the 18 billion level.
Bangladesh had an amount of around 48 billion a several couple of years ago but its reserve has been slowly losing its foreign funds, which are a key safety net against sudden changes in the economy. Several things have led to this drop, such as higher trade costs because of global inflation and the current war between Russia and Ukraine. Besides that, the dollar's rise against other currencies has made Bangladesh's trade bill even taller.
The facts are the lower controls over international trade and corrupt businessmen are making the crisis more severe with eh over-invoicing and keeping the money outside of the country for a greater dollar rate a the Bangladeshi taka (BDT) is inflated every day. The people are also sending their earnings through unofficial channels for higher rates and low-cost transactions which is also a major issue with the reserve.
That's why Bangladesh make a medium of transaction through Indian Rupee recently but the sky-high trade deficit is making the situation more difficult. To make things even worse, India recently put limits on Bangladesh's rupee trade, which has made it harder to do business across borders. This has made it harder for Bangladesh to spread its currency savings and pay its neighbor in rupees, which has a long history as a trade currency.
The Rise of the Yuan: A New Money for Settlement?
In reaction to these problems, Bangladesh is looking into other ways to settle disputes. The country just recently said it would settle bank loans using the Chinese Yuan (CNY). This move shows that the Yuan is becoming more accepted in foreign trade and could mean a move away from a system based on the dollar.
Looking for a 35 billion CNY or $5 billion loan from China in CNY
Bangladesh is also said to be asking China for a huge loan of 35 billion RMB. If this loan is secured, it could give Bangladesh much-needed money and ease the strain on its shrinking dollar savings. A big loan like this, though, could make the economy of Bangladesh even more dependent on China.
Things are not just bad in Bangladesh. More and more people are questioning why the US dollar is so important in international trade. Some countries, like Russia and India, have already done business without using the dollar. This is especially true in their trade with Iran. Together, this pattern and Bangladesh's recent actions point to a possible speeding up of de-dollarization, the process by which the US dollar loses its top spot in international banking.
If the trend toward less use of the dollar continues, it could have very big effects. If the dollar loses its strength, it could affect the power of the US economy, which could lead to a more multipolar banking system. The rise of alternate currencies like the Yuan could also change the way people deal around the world and the way politics work in the world. De-dollarization could be good in some ways, but it also has problems. For different dispute resolution methods to build trust and security, countries must work together. These options may also work, but only if the countries that issue them are strong economically and have a world reach.
Bangladesh's current situation shows how hard it is to live in a world that is losing its dependence on the dollar. The country needs to find a way to meet its current financial needs while also reducing the risks that come with becoming more dependent on a single currency, like the dollar or the Yuan. Similar changes are happening in other places, like Bangladesh, which suggests that the world banking system might change. It's still unclear whether this will lead to a multipolar financial order or a new currency that takes the place of the dollar as the main one. One thing is for sure, though: big changes are coming to the world of business.
But the world economy is still not okay or suitable for such changes at an instant as there are many factors that need to be settled first. The US dollar will likely continue to be the most important asset for central banks and foreign trade for a longer time in the future also as the US economy is the largest one and it has control over a portion of the world economy. The competitors like the Chinese yuan, the Japanese yen, or a shared BRICS currency could hurt the dollar's performance. However, the dollar will remain the most important currency for several decades in future.
The dollar will remain the strongest currency in the world's financial markets for many reasons and some of these reasons are as follows:
The yuan isn't easy to exchange to go up against the dollar. The Chinese government has been trying to make the yuan a global currency that can compete with the dollar, but it isn't liquid enough to make the dollar less important. One reason for this is that China has strict capital controls on its currency, which means that only a certain amount of cash can enter and leave the country.
The dollar won't change because of worries about the US debt. Some people who are negative about the dollar say that people are losing faith in it because of worries about the US's growing debt. This doesn't change people's trust in the US dollar, though, because it has long been known as a very flexible safe-haven asset.
Cryptocurrency isn't a good replacement for the dollar. Cryptocurrencies like Bitcoin can be bought and sold, but they change value too quickly to be a real option to the dollar.
Still, the trust issues among the nations need to be solved for another global currency like the USD.
Other economic experts have also said that they don't think the dollar will lose its top spot any time soon. It takes decades to get rid of a dominant currency because people take a long time to switch to other currencies once they know the dominant currency is "safe."
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Dear @tanzil2024 !
Hassan!
Thank you for good article!😃
I predict that the United States will create a digital currency to replace the dollar.
It is not an easy task, you can't replace the dollar, but can create a digital version China has a digital version of the Yuan called 'e-CNY' and it is now widely accepted in Beijing and in other major cities.
!MEME
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