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31 Mar 2022
IMF Issues Warning about Russia Sanctions Rattling Dollar’s Dominance
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The International Monetary Fund (IMF) has warned that the fiscal penalties levied on Russia in response to its invasion of Ukraine last month can lead to the eventual erosion of the U.S. dollar’s status as the reserve currency, resulting in a destabilized monetary system.
According to Reuters, Gita Gopinath, the First Deputy Managing Director of the IMF, told The Financial Times, "The dollar would remain the major global currency even in that landscape but fragmentation at a smaller level is certainly quite possible." Gopinath also revealed that some countries are already contemplating switching their preferred trade currency.
Since it invaded Ukraine in late February, Russia has received a string of sanctions and bans from the U.S. and its allies. Gopinath contends that when other currencies become more prominent in global trade as a result, it could lead to greater heterogeneity in central banks-held reserve assets.
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