Can Pakistan shed its dependency on the US dollar?

The Pakistani rupee is expected to end the year on a historic low — as Asia’s worst-performing currency — having shed almost 20 per cent of its value against the US dollar. Even with the authorities clamping down on profiteering, smuggling and banning the imports of ‘luxury goods’, the currency isn’t expected to fare any better next year. Amid all this, one idea that has been gaining traction in policy circles, not just in Pakistan but among other regional players too, is the need to lessen the dependency on the US dollar. But what does this mean for Pakistan? And is it even doable? The buzzword De-dollarisation is no longer a financial buzzword; it is a strategic move by nations to diminish their reliance on the United States dollar (USD) in global trade, transactions, and reserves. In recent times, this shift has been triggered by complex geopolitical dynamics, particularly the Ukraine-Russia conflict and ensuing Western sanctions, reshaping the landscape of cross-border trade and payment systems. Additionally, aggressive rate hikes by the US Federal Reserve aimed at curbing domestic inflation have further catalysed this global trade transformation. Notably, the USD’s share, on the global scale, declined from 73 per cent in 2001 to 55pc in 2020 and further to 47pc since the initiation of sanctions against Russia.