On February 15th, 2024, Egypt made a groundbreaking announcement that sent ripples through the global economy and geopolitics: it would no longer use the US dollar in its trade transactions with other countries. This decision, based on economic rationality and sovereignty, marks a significant shift in Egypt’s trade policy and could have far-reaching implications for the world.
Egypt, one of the largest economies in Africa and the Middle East, with a GDP of about $360 billion and a population of over 100 million, has traditionally been a key ally of the United States in the region. However, economic challenges, including high inflation, public debt, and currency devaluation, coupled with the impact of the COVID-19 pandemic, have prompted Egypt to reevaluate its trade strategy.
To enhance its trade competitiveness and financial stability, Egypt has decided to use a basket of currencies in its trade transactions, including the euro, the Chinese yuan, the Russian ruble, the Turkish lira, the Indian rupee, and the African franc. This move is aimed at reducing its dependence on the US dollar and diversifying its foreign reserves.
Egypt’s decision has been met with mixed reactions from other countries. Some see it as a positive step towards economic independence and diversification, while others view it as a challenge to the US dollar’s dominance and a threat to the global financial system. The United States has expressed concern over Egypt’s decision and warned of possible repercussions.
The implications of Egypt’s decision are profound. It could benefit Egypt by reducing its exposure to exchange rate fluctuations and enhancing its bargaining power with other countries. It could also inspire other countries to follow suit and diversify their currency holdings, potentially weakening the US dollar’s hegemony.
However, there are also risks and costs associated with Egypt’s decision. It could alienate its traditional allies and invite retaliation from the United States. It could also disrupt its trade flows and financial markets, leading to economic instability. In conclusion, Egypt’s decision to stop using the US dollar in trade is a bold and unprecedented move that could have significant implications for itself and the world. While it offers opportunities for economic independence and diversification, it also entails risks and challenges that Egypt must carefully navigate in the coming years
