Connect with us

Features

Putting de-dollarization in perspective

Published

on

By Rumeth Jayasinghe

In its simplest sense, de-dollarization refers to the global shift towards reducing reliance on the US dollar as a reserve currency, medium of exchange, or unit of account. Some experts frame this as a shift towards alternative currencies – that is, except the dollar – in global transactions.

For 80 years, the US dollar has remained the dominant currency, due to its wide acceptance and liquidity. This dominance was reinforced by the Bretton Woods Agreement in the 1940s.

Today the US dollar is used in 88% of all international transactions, making it the most used currency in trade worldwide. It is also the most held reserve currency. Important commodities such as crude oil and natural gas are priced in the dollar.

Despite its dominance in international trade, countries such as Russia and China have been persuading other nations to use alternative currencies, often in preference to their currencies, the yuan and the ruble respectively.

This call seems to have been heeded to some extent. In May 2023, Argentina announced it would pay for Chinese imports in yuan, while Brazilian President Lula De Silva called on the BRICS nations (Brazil, Russia, India, China, and South Africa) to create a common currency for global transactions.

Given the growth in the movement for de-dollarization, it is therefore important to understand its history and its background. Following the end of World War II, America’s global dominant role expanded, transforming New York into the world’s financial capital and the US dollar into the world’s most important currency.

In 1944, the Bretton Woods Agreement created an international foreign exchange system which made the US dollar the de facto global reserve currency. In line with the original Bretton Woods framework, all other currencies of the signatories would be pegged to the US dollar. In return, its value would be backed by gold reserves.

This agreement continued for more than 20 years until Richard Nixon decided to end the convertibility of the dollar in the early 1970s. That marked the end of the Bretton Woods Agreement.In 1973, the dollar was cemented as the petrodollar after the US and Saudi Arabia reached an agreement on the oil trade in exchange for military concessions.

The idea of establishing an Asian Monetary Fund emerged in 1997, after the economies of South-East Asia were devastated by an economic crisis. Japanese authorities proposed an Asian Monetary Fund, an institution which would help Asian economies to overcome financial challenges. At one level it posed a direct threat to the IMF.

Despite it being the first movement to call for a shift from the IMF, the idea of creating an Asian Monetary Fund never took off since it posed a challenge to US influence in Asia as well. It led to a disagreement between Japan and the US, and the US opposed the idea. Interestingly enough, China also did not approve of Japan’s proposal, mainly due to its strained relationship with Tokyo.

The BRICS currency

Recently, the BRICS (Brazil, Russia, India, China and South Africa) Group explored the possibility of creating a common currency for cross-border transactions, and reducing the influence of the dollar. In April 2023, Deputy Chairman of the Russian Duma Alexander Babakov announced that the BRICS nations were on the way to creating a new currency for global trade, which would be backed by commodities such as gold and rare earth materials.

This statement was backed by Brazilian President Lula da Silva, who contended, rather frankly, that he saw no reason why countries should base their trade on the dollar.

However, BRICS has not been united or unified on where it wants to go with de-dollarization. A few weeks ago, India distanced itself from calls for a BRICS currency, after Foreign Minister Jaishankar contended that India would not support such a proposal. In response a Chinese think-tank demanded India’s expulsion from the group, framing the country as the weakest link in it.

China – Brazil agreement

In the aftermath of Lula da Silva’s visit to China last March, Brazil and China signed an agreement to conduct bilateral trade in their national currencies, that is the Brazilian Real and the Chinese Yuan, thus eliminating the US Dollar in bilateral trade.

The agreement will enable the two countries to conduct and if possible expand trade amounting to USD 150 billion annually using their national currencies. Both countries have acknowledged that the agreement will help them reduce the transaction costs between and encourage investments.

The Russian invasion of Ukraine

The sanctions placed on Russia following its invasion of Ukraine last year have made it difficult for the country to use the US dollar in global trade. Russian banks have been removed from the SWIFT system and assets worth USD 630 billion have been frozen.

Such developments compelled Russian banks and businesses to move into alternative currencies. Since 2022, Russia has conducted most of its trade with China with the yuan. The country has also entered a rupee-ruble agreement with India.

Today, despite or more correctly because of sanctions, Russia trades with many countries and in many national currencies, including across the Middle East and the Europian Economic Union.

The US dollar’s share in global reserves is declining considerably. The Chinese yuan currently sits fifth in global reserve rankings, with 2.7% share. The main reason for the yuan’s rise has been Chinese investments and economic partnerships with other countries.

Other currencies like the ruble and Indian rupee have also seen growth, also due to agreements with other countries. Indeed, around 60 countries or more are trading with other countries using their respective currencies. Bilateral trade agreements have played a part in this process. A good example of this would be the agreement between Sri Lanka and Mauritius to use the rupee in bilateral trade.

The US’s response to the Russian invasion of Ukraine, through the expulsion of Russian banks from the SWIFT system and the freezing of Russian assets, raised fears of the US weaponizing the dollar. This strengthened an already active movement towards reducing reliance on the dollar, across the Global South in particular. Many countries have also expressed a desire to leave SWIFT, with Russia and China trying to create a new financial messaging system for international transactions.

De-dollarization can help countries shield themselves from the fallout of US monetary policy. Currently, for instance, any appreciation in the US dollar relative to other currencies, due to a decision by the US Federal Reserve to raise interest rates, can make it harder for countries to repay their foreign debt.

In that sense, de-dollarization increases the monetary autonomy of a country. It gives countries the leeway and the breathing space to boost economic activity. De-dollarization could also come in handy for economies such as China and India, as it can help such countries to boost their currencies and improve their development prospects while projecting their influence regionally and globally.

De-dollarization also has its disadvantages. When countries change from the US dollar to another currency, transaction costs come into play. Countries require proper banking infrastructure, finance regulations, and sufficient reserves to make de-dollarization a reality. It poses a threat to international trade as well, mainly due to uncertainties and disruptions in investment flows and international transactions.

Since a lot of international trade is conducted with the dollar, some countries would be reluctant to accept alternative currencies such as yuan or ruble in international transactions.De-dollarization has been ongoing for many years, but it has lately gained momentum rapidly. When dealing with this process, countries should understand its pros and cons before coming to a decision. They should act neutral and stay unbiased.

Though de-dollarization is being discussed widely, the dollar still acts as the king of all currencies. Whether its usage will drop or not remains highly debatable, if unpredictable. The growth of other currencies and the change in world order shows that the next five or six years will be crucial in deciding whether the US dollar will retain its dominant position in that order.

Rumeth Jayasinghe is a student who is currently pursuing economics for his higher studies. Having done his A Levels in 2022, he has a wide range of interests, including international relations, sports diplomacy, and music. He can be reached at rumethj17@gmail.com.



Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Features

Ranking public services with AI — A roadmap to reviving institutions like SriLankan Airlines

Published

on

Efficacy measures an organisation’s capacity to achieve its mission and intended outcomes under planned or optimal conditions. It differs from efficiency, which focuses on achieving objectives with minimal resources, and effectiveness, which evaluates results in real-world conditions. Today, modern AI tools, using publicly available data, enable objective assessment of the efficacy of Sri Lanka’s government institutions.

Among key public bodies, the Supreme Court of Sri Lanka emerges as the most efficacious, outperforming the Department of Inland Revenue, Sri Lanka Customs, the Election Commission, and Parliament. In the financial and regulatory sector, the Central Bank of Sri Lanka (CBSL) ranks highest, ahead of the Securities and Exchange Commission, the Public Utilities Commission, the Telecommunications Regulatory Commission, the Insurance Regulatory Commission, and the Sri Lanka Standards Institution.

Among state-owned enterprises, the Sri Lanka Ports Authority (SLPA) leads in efficacy, followed by Bank of Ceylon and People’s Bank. Other institutions assessed included the State Pharmaceuticals Corporation, the National Water Supply and Drainage Board, the Ceylon Electricity Board, the Ceylon Petroleum Corporation, and the Sri Lanka Transport Board. At the lower end of the spectrum were Lanka Sathosa and Sri Lankan Airlines, highlighting a critical challenge for the national economy.

Sri Lankan Airlines, consistently ranked at the bottom, has long been a financial drain. Despite successive governments’ reform attempts, sustainable solutions remain elusive.

Globally, the most profitable airlines operate as highly integrated, technology-enabled ecosystems rather than as fragmented departments. Operations, finance, fleet management, route planning, engineering, marketing, and customer service are closely coordinated, sharing real-time data to maximise efficiency, safety, and profitability.

The challenge for Sri Lankan Airlines is structural. Its operations are fragmented, overly hierarchical, and poorly aligned. Simply replacing the CEO or senior leadership will not address these deep-seated weaknesses. What the airline needs is a cohesive, integrated organisational ecosystem that leverages technology for cross-functional planning and real-time decision-making.

The government must urgently consider restructuring Sri Lankan Airlines to encourage:

=Joint planning across operational divisions

=Data-driven, evidence-based decision-making

=Continuous cross-functional consultation

=Collaborative strategic decisions on route rationalisation, fleet renewal, partnerships, and cost management, rather than exclusive top-down mandates

Sustainable reform requires systemic change. Without modernised organisational structures, stronger accountability, and aligned incentives across divisions, financial recovery will remain out of reach. An integrated, performance-oriented model offers the most realistic path to operational efficiency and long-term viability.

Reforming loss-making institutions like Sri Lankan Airlines is not merely a matter of leadership change — it is a structural overhaul essential to ensuring these entities contribute productively to the national economy rather than remain perpetual burdens.

By Chula Goonasekera – Citizen Analyst

Continue Reading

Features

Why Pi Day?

Published

on

International Day of Mathematics falls tomorrow

The approximate value of Pi (π) is 3.14 in mathematics. Therefore, the day 14 March is celebrated as the Pi Day. In 2019, UNESCO proclaimed 14 March as the International Day of Mathematics.

Ancient Babylonians and Egyptians figured out that the circumference of a circle is slightly more than three times its diameter. But they could not come up with an exact value for this ratio although they knew that it is a constant. This constant was later named as π which is a letter in the Greek alphabet.

Archimedes

It was the Greek mathematician Archimedes (250 BC) who was able to find an upper bound and a lower bound for this constant. He drew a circle of diameter one unit and drew hexagons inside and outside the circle such that the sides of each hexagon touch the sides of the circle. In mathematics the circle passing through all vertices of a polygon is called a ‘circumcircle’ and the largest circle that fits inside a polygon tangent to all its sides is called an ‘incircle’. The total length of the smaller hexagon then becomes the lower bound of π and the length of the hexagon outside the circle is the upper bound. He realised that by increasing the number of sides of the polygon can make the bounds get closer to the value of Pi and increased the number of sides to 12,24,48 and 60. He argued that by increasing the number of sides will ultimately result in obtaining the original circle, thereby laying the foundation for the theory of limits. He ended up with the lower bound as 22/7 and the upper bound 223/71. He could not continue his research as his hometown Syracuse was invaded by Romans and was killed by one of the soldiers. His last words were ‘do not disturb my circles’, perhaps a reference to his continuing efforts to find the value of π to a greater accuracy.

Archimedes can be considered as the father of geometry. His contributions revolutionised geometry and his methods anticipated integral calculus. He invented the pulley and the hydraulic screw for drawing water from a well. He also discovered the law of hydrostatics. He formulated the law of levers which states that a smaller weight placed farther from a pivot can balance a much heavier weight closer to it. He famously said “Give me a lever long enough and a place to stand and I will move the earth”.

Mathematicians have found many expressions for π as a sum of infinite series that converge to its value. One such famous series is the Leibniz Series found in 1674 by the German mathematician Gottfried Leibniz, which is given below.

π = 4 ( 1 – 1/3 + 1/5 – 1/7 + 1/9 – ………….)

The Indian mathematical genius Ramanujan came up with a magnificent formula in 1910. The short form of the formula is as follows.

π = 9801/(1103 √8)

For practical applications an approximation is sufficient. Even NASA uses only the approximation 3.141592653589793 for its interplanetary navigation calculations.

It is not just an interesting and curious number. It is used for calculations in navigation, encryption, space exploration, video game development and even in medicine. As π is fundamental to spherical geometry, it is at the heart of positioning systems in GPS navigations. It also contributes significantly to cybersecurity. As it is an irrational number it is an excellent foundation for generating randomness required in encryption and securing communications. In the medical field, it helps to calculate blood flow rates and pressure differentials. In diagnostic tools such as CT scans and MRI, pi is an important component in mathematical algorithms and signal processing techniques.

This elegant, never-ending number demonstrates how mathematics transforms into practical applications that shape our world. The possibilities of what it can do are infinite as the number itself. It has become a symbol of beauty and complexity in mathematics. “It matters little who first arrives at an idea, rather what is significant is how far that idea can go.” said Sophie Germain.

Mathematics fans are intrigued by this irrational number and attempt to calculate it as far as they can. In March 2022, Emma Haruka Iwao of Japan calculated it to 100 trillion decimal places in Google Cloud. It had taken 157 days. The Guinness World Record for reciting the number from memory is held by Rajveer Meena of India for 70000 decimal places over 10 hours.

Happy Pi Day!

The author is a senior examiner of the International Baccalaureate in the UK and an educational consultant at the Overseas School of Colombo.

by R N A de Silva

Continue Reading

Features

Sheer rise of Realpolitik making the world see the brink

Published

on

A combined US-Israel attack on Iran.(BBC)

The recent humanly costly torpedoing of an Iranian naval vessel in Sri Lanka’s Exclusive Economic Zone by a US submarine has raised a number of issues of great importance to international political discourse and law that call for elucidation. It is best that enlightened commentary is brought to bear in such discussions because at present misleading and uninformed speculation on questions arising from the incident are being aired by particularly jingoistic politicians of Sri Lanka’s South which could prove deleterious.

As matters stand, there seems to be no credible evidence that the Indian state was aware of the impending torpedoing of the Iranian vessel but these acerbic-tongued politicians of Sri Lanka’s South would have the local public believe that the tragedy was triggered with India’s connivance. Likewise, India is accused of ‘embroiling’ Sri Lanka in the incident on account of seemingly having prior knowledge of it and not warning Sri Lanka about the impending disaster.

It is plain that a process is once again afoot to raise anti-India hysteria in Sri Lanka. An obligation is cast on the Sri Lankan government to ensure that incendiary speculation of the above kind is defeated and India-Sri Lanka relations are prevented from being in any way harmed. Proactive measures are needed by the Sri Lankan government and well meaning quarters to ensure that public discourse in such matters have a factual and rational basis. ‘Knowledge gaps’ could prove hazardous.

Meanwhile, there could be no doubt that Sri Lanka’s sovereignty was violated by the US because the sinking of the Iranian vessel took place in Sri Lanka’s Exclusive Economic Zone. While there is no international decrying of the incident, and this is to be regretted, Sri Lanka’s helplessness and small player status would enable the US to ‘get away with it’.

Could anything be done by the international community to hold the US to account over the act of lawlessness in question? None is the answer at present. This is because in the current ‘Global Disorder’ major powers could commit the gravest international irregularities with impunity. As the threadbare cliché declares, ‘Might is Right’….. or so it seems.

Unfortunately, the UN could only merely verbally denounce any violations of International Law by the world’s foremost powers. It cannot use countervailing force against violators of the law, for example, on account of the divided nature of the UN Security Council, whose permanent members have shown incapability of seeing eye-to-eye on grave matters relating to International Law and order over the decades.

The foregoing considerations could force the conclusion on uncritical sections that Political Realism or Realpolitik has won out in the end. A basic premise of the school of thought known as Political Realism is that power or force wielded by states and international actors determine the shape, direction and substance of international relations. This school stands in marked contrast to political idealists who essentially proclaim that moral norms and values determine the nature of local and international politics.

While, British political scientist Thomas Hobbes, for instance, was a proponent of Political Realism, political idealism has its roots in the teachings of Socrates, Plato and latterly Friedrich Hegel of Germany, to name just few such notables.

On the face of it, therefore, there is no getting way from the conclusion that coercive force is the deciding factor in international politics. If this were not so, US President Donald Trump in collaboration with Israeli Rightist Premier Benjamin Natanyahu could not have wielded the ‘big stick’, so to speak, on Iran, killed its Supreme Head of State, terrorized the Iranian public and gone ‘scot-free’. That is, currently, the US’ impunity seems to be limitless.

Moreover, the evidence is that the Western bloc is reuniting in the face of Iran’s threats to stymie the flow of oil from West Asia to the rest of the world. The recent G7 summit witnessed a coming together of the foremost powers of the global North to ensure that the West does not suffer grave negative consequences from any future blocking of western oil supplies.

Meanwhile, Israel is having a ‘free run’ of the Middle East, so to speak, picking out perceived adversarial powers, such as Lebanon, and militarily neutralizing them; once again with impunity. On the other hand, Iran has been bringing under assault, with no questions asked, Gulf states that are seen as allying with the US and Israel. West Asia is facing a compounded crisis and International Law seems to be helplessly silent.

Wittingly or unwittingly, matters at the heart of International Law and peace are being obfuscated by some pro-Trump administration commentators meanwhile. For example, retired US Navy Captain Brent Sadler has cited Article 51 of the UN Charter, which provides for the right to self or collective self-defence of UN member states in the face of armed attacks, as justifying the US sinking of the Iranian vessel (See page 2 of The Island of March 10, 2026). But the Article makes it clear that such measures could be resorted to by UN members only ‘ if an armed attack occurs’ against them and under no other circumstances. But no such thing happened in the incident in question and the US acted under a sheer threat perception.

Clearly, the US has violated the Article through its action and has once again demonstrated its tendency to arbitrarily use military might. The general drift of Sadler’s thinking is that in the face of pressing national priorities, obligations of a state under International Law could be side-stepped. This is a sure recipe for international anarchy because in such a policy environment states could pursue their national interests, irrespective of their merits, disregarding in the process their obligations towards the international community.

Moreover, Article 51 repeatedly reiterates the authority of the UN Security Council and the obligation of those states that act in self-defence to report to the Council and be guided by it. Sadler, therefore, could be said to have cited the Article very selectively, whereas, right along member states’ commitments to the UNSC are stressed.

However, it is beyond doubt that international anarchy has strengthened its grip over the world. While the US set destabilizing precedents after the crumbling of the Cold War that paved the way for the current anarchic situation, Russia further aggravated these degenerative trends through its invasion of Ukraine. Stepping back from anarchy has thus emerged as the prime challenge for the world community.

Continue Reading

Trending