De-dollarisation fails to expand emerging market policy autonomy
Reducing reliance on the US dollar will neither resolve macroeconomic instability nor restore policy sovereignty in emerging markets, according to a South African Reserve Bank study. Structural network effects and domestic institutional depth remain the primary determinants of policy space.
The persistent grip of network effects
The US dollar’s share of global foreign exchange reserves dropped from over 70 percent in the early 2000s to roughly 57 percent by late 2025, but structural exposure persists.
Most emerging market trade and external debt remain dollar-denominated.
Proposals for alternatives, including a common BRICS currency, face substantial obstacles: member economies fail optimal currency area criteria, while bilateral exchange rate volatility exceeds dollar fluctuations.
Renminbi internationalisation remains policy-driven and constrained by China’s capital controls.
Furthermore, the rapid growth of dollar-backed stablecoins functions as digital eurodollars, reinforcing global demand for US assets such as Treasuries.
The real bottleneck at home
South Africa has contained foreign exchange mismatch risks through deep local-currency debt markets and modest foreign reserves of $75 billion.
However, external liabilities remain heavily concentrated in US and European investors, who hold 51 percent and 30 percent of portfolio liabilities respectively.
Financial fragmentation risks scaling back these allocations and widening risk premiums.
The primary constraint on domestic growth is not currency denomination, but the weak institutional capacity to convert foreign capital into productive, long-term potential growth.
Fixing the wrong problem
Chasing de-dollarisation distracts emerging economies from the structural reforms they actually require.
Swapping transaction currencies will not manufacture macroeconomic stability without deep domestic capital markets and fiscal discipline.
Real policy autonomy rests on institutional credibility rather than alternative settlement rails.