India, prominent member of the BRICS alliance, is actively encouraging Ethiopia to shift its trade transactions from the US dollar to local currencies.
This strategic push aligns with the broader BRICS objective of reducing dependency on dominant global currencies, particularly the US dollar, in international trade.
The suggestion was made in the context of Ethiopia’s recent induction into the BRICS during their 15th summit in Johannesburg, alongside other new members including major oil-exporting nations.
Strengthening Local Economies and Reducing Dollar Dependence
India’s proposal to Ethiopia to use local currencies for bilateral trade payments represents a significant step towards economic sovereignty for both nations.
By cutting ties with the US dollar in their trade transactions, India and Ethiopia aim to bolster their respective local currencies, potentially enhancing the financial stability and autonomy of their economies.
This move is not just a financial strategy but also a political statement, showcasing BRICS nations’ commitment to challenging the traditional global financial order.
The bilateral trade between India and Ethiopia currently stands at an impressive $642.59 million, with India being the second-largest exporter to Ethiopia.
By settling trade in their local currencies, these nations could further weaken the US dollar’s influence in international trade.
This shift may set a precedent for other BRICS members, potentially leading to a broader adoption of local currencies in cross-border transactions and diminishing the global dominance of the US dollar.
India and Ethiopia: Pioneering a New Trade Model
India’s urging comes at a time when Ethiopia is experiencing rapid economic growth, making it the fastest-growing economy in Africa.
Ethiopia’s collaboration with India, especially in embracing India’s UPI payment system, marks the beginning of a new era in Africa-India economic relations.
The top three Indian companies have already invested $5 billion in Ethiopia across various sectors, including agriculture, engineering, water management, pharmaceuticals, and healthcare.
This deepening economic relationship is indicative of India’s strategic interest in strengthening ties with African nations, particularly in the context of BRICS.
The suggestion for Ethiopia to transition to local currency payments in trade with India is part of a larger strategy by BRICS nations to establish a more balanced and equitable global financial system.
By promoting the use of local currencies in international trade, BRICS countries are attempting to create a more diverse and resilient financial ecosystem.
This initiative also aligns with the broader goal of reducing reliance on Western financial systems and institutions, thereby increasing the financial independence and sovereignty of BRICS nations.
India’s proposal to Ethiopia to use local currencies in their bilateral trade is a bold step towards reshaping the global financial landscape.
This proposal signals a growing trend among emerging economies to challenge the status quo and assert greater control over their economic affairs.
Such a move could inspire other countries within and beyond the BRICS bloc to consider similar steps, potentially leading to a more multipolar financial world where the dominance of a single global currency is diminished.
