Why de-dollarizing Egypt is easier said than done?

The announcement came as part of a global and local movement to shed the USD as the world’s currency franca for trade in the wake of the Federal Reserve’s series of interest rate hikes since 2022, meant to tackle soaring inflation and resulting in a stronger dollar.

That muscular dollar has hurt many economies around the world, including Egypt, which suffered immense pressure on its currency, leading it to lose over 75 percent of its value since March 2022, and a spiralled inflation that peaked at 33.9 percent in March 2023 before easing for the first time in almost a year in April.

While Egypt seeks to find a solution to its USD shortage and reduce dependence on the greenback, abandoning the dollar for imports of basic commodities may not be currently a practical or effective strategy due to Egypt's large trade deficits.

Experts agree that for Egypt to realistically pursue de-dollarisation, major changes in the international financial system and increased acceptance of alternative currencies have to be introduced first.

Trade imbalance

"For countries to apply trade exchange using their respective currencies, a major change in the global economic and financial system is required. These countries must also maintain equal imports and exports to prevent a surplus of currencies that cannot be utilized in trade with other countries,” Ahmed Khattab, a financial analyst, said.

"For instance, India's trade deficit with Russia reached approximately $34.7 billion between April 2022 and January 2023. If India were to export goods to Russia in rupees, that means that Russia would accumulate a significant surplus of over 2.8 trillion rupees that cannot be utilized in trade with other nations,” Khattab explained.

“In that scenario, India would not possess more goods to export to Russia to make up for that imbalance.