Africa Bears the Brunt of De-dollarisation Dreams

Africa Bears the Brunt of De-dollarisation Dreams

Nov 29 , 2025. By Mikiyas Mulugeta (PhD) ( Mikiyas Mulugeta (PhD) (mikiusc2017@gmail.com) is a consultant and director of training and development programs at the Centre for African Leadership Studies (CALS) and XHub-Addis. )

Ethiopia offers a pointed example. As the Birr weakens, the cost of dollar-denominated imports, such as fuel, construction materials, and essential goods, rises sharply. The government’s openness to BRICS-led alternatives has not insulated it from the domestic realities of currency instability and economic management.

Global finance is changing, but the shift away from the US Dollar remains more rhetoric than reality. For years, governments have invoked de-dollarisation as a political slogan, a way to signal distance from Washington without confronting the harder task of fixing domestic economic weaknesses.

Even as global policymakers discuss alternatives with growing seriousness, the Dollar still sits firmly at the centre of world reserves, trade, and capital flows. Nowhere is the difference between aspirational talk and practical action more consequential than in Africa.

BRICS has become the most vocal champion of this agenda, using its summits to amplify proposals for alternatives to the Dollar. Formed by Brazil, Russia, India, China, and South Africa, the bloc brings together economies large enough to demand attention when they call for a more diversified system. Its members have experimented with local-currency settlements, extended development finance in non-dollar denominations, and built payment channels designed to operate outside the Dollar’s orbit. These initiatives have shown that global finance need not be exclusively dollar-denominated.

However, the bloc’s efforts have also exposed the project's structural limits. BRICS does not have a shared currency. Its members remain divided on what a unified path should look like, and many of their strategic interests diverge.

India, despite its economic weight, avoids endorsing any framework that resembles a joint currency arrangement. Its policymakers show no interest in severing ties with US capital markets or abandoning the security that Dollar-linked financial systems provide. China is pushing for a broader international role for the renminbi but is moving gradually, prioritising stability over disruption. South Africa, deeply integrated in Western-led financial systems, is wary of provoking economic or political risks at home.

Beyond BRICS, other shifts in global reserves and settlement patterns are occurring, but on modest scales. Some central banks in Asia, the Middle East, and Latin America are spreading their reserve holdings across multiple currencies to protect themselves from volatility and the political leverage that comes with overreliance on US policy decisions. Certain commodity traders have begun settling transactions in non-dollar currencies.

But these developments do not mirror an organised and ideological campaign against the Dollar. They are pragmatic moves targeting risk management, not the foundation of a new financial order.

For African economies, these debates should not be abstract. Most countries on the continent depend heavily on dollar-denominated imports, such as fuel, food, machinery, pharmaceuticals, and capital goods. When the Dollar strengthens, the cost of essential items rises sharply in local currency terms, even if global prices remain unchanged. Households feel the pressure, businesses struggle to manage inventory costs, and governments face increased budgetary strain.

Ethiopia illustrates this exposure clearly. Its major imports are priced and settled mainly in Dollars. A strong Greenback pushes up domestic costs for fuel, construction materials, and key inputs. In this context, the idea of de-dollarisation takes on a practical dimension. If alternatives were available and reliable, they could lessen the immediate burden of currency swings on the real economy.

But switching the unit of settlement does not by itself insulate an economy from volatility. Without strong monetary policy, disciplined public finances, and institutions capable of commanding trust, shifting away from the Dollar could introduce new vulnerabilities rather than solve old ones.

Ethiopia’s situation shows how much of the problem is domestic rather than global. The government has expressed openness to BRICS-led initiatives, explored alternative currency arrangements with partners, and engaged the IMF on reform programs. But the persistent weakness of the Birr is rooted in domestic fundamentals. As long as the public lacks confidence that the Birr could hold its value, efforts to diversify away from the Dollar will remain mostly symbolic. The debate abroad will matter little without stability at home.

The credibility of a currency ultimately depends on the quality of economic management. Transparency in policymaking, predictability in fiscal decisions, and consistency in regulatory behaviour are what anchor confidence. Until Ethiopia and other African economies strengthen those foundations, the global conversation about de-dollarisation will remain a discussion rather than a deliverable.

For Africa more broadly, the challenge is to convert the language of global realignment into real domestic capacity. Financial autonomy should not be framed as rejecting the Dollar but as achieving the ability to trade and borrow in multiple currencies, manage exposure prudently, and negotiate international finance from a position of strength. The experiments led by BRICS and other blocs can provide leverage, but leverage is only useful for countries that have prepared their own institutions to use it effectively.

Despite the headlines about alternatives, the Dollar remains the dominant currency in trade, financial markets, and the reserve portfolios of central banks worldwide. Most African exports and imports are still priced in Dollars. Where countries are trying new settlement systems, they are doing so tentatively, more to hedge against external shocks than to pursue sweeping strategic shifts. In this environment, African governments cannot rely on external alliances or multilateral declarations to deliver structural change. Long-term stability will depend on their own governance, economic credibility, and institutional strength.

For Ethiopia and other countries watching the global debate unfold, the central question is not whether BRICS or any other platform will produce an alternative to the Dollar. The real question is whether African economies are prepared to take advantage of the shifting landscape. Those that combine careful international engagement with strong domestic policies will be better positioned to shape outcomes rather than merely adjusting to them. Those who wait for external actors to drive the change may find themselves exposed to the same vulnerabilities that have defined their financial systems for decades.

The future will favour countries that treat de-dollarisation not as a political slogan but as a gradual and disciplined project grounded in credibility and genuine choice. Africa may gain more room to manoeuvre in a world where financial power is more distributed, but opportunity alone does not guarantee progress. Without stable domestic economic foundations, every round of global debate will remain what it has been so far. Debate, not delivery.

PUBLISHED ON Nov 29,2025 [ VOL 26 , NO 1335]