Economic sanctions on Russia will dilute USD dominance in global trade: IMF

In a significant development, Gita Gopinath, the IMF’s First Deputy Managing Director, said, Western sanctions against Russia threaten to gradually dilute the dominance of the U.S. dollar and is likely to result in a fragmented international monetary system.

“The dollar would remain the major global currency even in that landscape but fragmentation at a smaller level is certainly quite possible,” said Gopinath while adding, many countries have already begun renegotiating contracts in the currency in which they get paid for trade.

The Russia-Ukraine conflict is also likely to increase the adoption of digital finance, from cryptocurrencies to stablecoins and central bank digital currencies.

With decreased dominance of the US dollar, national central banks are likely to further diversify the reserve of other currencies in global trade.

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