IMF says anti-Russia sanctions could weaken the dollar’s dominance and lead to a fragmented international monetary system

247, with financial times – Gita Gopinath, First Deputy Managing Director of the International Monetary Fund, said that anti-Russian sanctions imposed by the West on the military operation in Ukraine threaten to gradually weaken the dominance of the dollar and lead to a more fragmented international monetary system.

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According to Gopinath, the financial restrictions imposed on Russia encourage the emergence of small currency blocks based on trade between separate groups of countries.

“The dollar will remain the main global currency even in this scenario, but a lower level fragmentation is definitely possible,” she said. “We’re already seeing this with some countries renegotiating the currency in which they pay for trade.”

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Gopinath said greater use of other currencies in global trade leads to greater diversification of reserve assets held by national central banks.

“Countries tend to accumulate reserves in the currencies that they trade with the rest of the world and that they borrow from the rest of the world in, so you can see some slow trends towards other currencies playing a bigger role. [em ativos de reserva]”, He said.

She added that the dollar’s dominance is unlikely to be challenged in the medium term.

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