Bangladesh and India have come up with a plan to trade without using the U.S. dollar at all. Bangladesh Bank say this is because their country isn’t able to get enough foreign money, which makes it hard for them to buy things from other countries.
India & Bangladesh Trade in Their Own Currencies
Bangladesh and India have decided to do their trade in their own currencies instead of using the U.S. dollar. This decision was made because Bangladesh is having a difficult time getting enough money in U.S. dollars due to problems with Russia and Ukraine.
Replacing the American dollar with Indian rupees and Bangladeshi takas would help to lower business costs, make transactions faster, and help increase trading in the region. Mezbaul Haque, head of Bangladesh Bank said that: “Because India is a major trade partner of Bangladesh, getting rid of the dollar could mean bigger benefits for both countries.”
The bank has shared that Bangladesh buys around $14 billion worth of things from India, but they only send out about$2 billion.
New Trade Agreement between India and Bangladesh
The agreement between Bangladesh and India would bring beneficial effects for both sides. In this deal, Bangladesh is allowed to pay in their currency, rupee, for the same quantity it sends out while importing from India. Mr Haque remarked that the decision plays an important role as Bangladesh is mainly an importing country rather than exporting one which helps narrow down the trade gap in the long term.
Haque thinks this process will begin in June because banks from both countries are setting up special accounts for money to be exchanged between them. This will save money because it avoids the need to change currencies multiple times which usually happens when doing transactions.
The Reserve Bank of India just made a new rule on April 1 that allows countries to pay in rupees when their dollar supply is running low.
Other countries are starting to replace the US dollar with other currencies when trading with each other. For instance, Argentina chose to pay China using the Chinese yuan in order to protect their dollars. Brazil already finished a trade deal done only with yuan and BRICS nations (countries like Russia, India and South Africa) are thinking about creating their own currency so they don’t have to use the US dollar.
Do you have an opinion about India and Bangladesh trading with each other using their own countries’ money? Let us know your thoughts in the comments section.