Here's A Look At Countries Using The Greenback As Local Currency
Taking Dollarization To The Next Level: Here's A Look At Countries Using The Greenback As Local Currency
Filip De Mott Fri, November 24, 2023
Argentina's presidential election puts the country closer to adopting the dollar as its own currency. But the switch could mean risks, and Argentina would have to cede monetary control.
Several other countries, including Panama and Zimbabwe, have adopted the greenback. Pro-dollarization candidate Javier Milei has secured Argentina's presidency, laying the foundation for the country to adopt the US dollar — and join other countries that have done the same. It'll be no easy thing to implement, analysts have noted, as support in the Argentina's congress remains thin. But if successful, it would become the largest economy to dollarize.
"If Argentina uses the dollar, they're basically outsourcing their central bank and monetary policy to the US. And my sense is that few countries, especially few large countries, really want to do that," Bannockburn Global Forex strategist Marc Chandler told Business Insider in June.
Others have also warned of recessionary risks that can erupt from a sudden currency shift, especially as Argentina lacks dollars in its reserves.
Still, other countries have done it. Here are nations that use the US dollar as local currency. GDP and population estimates come from 2021 World Bank data.
Ecuador GDP: $106.17 billion Population: 17,797,737
The Latin American nation went through a number of currencies before landing on the sucre. However, when this became worthless, many citizens began accumulating dollars on their own, unofficially dollarizing the nation. Ecuador eventually adopted the US dollar in 2000.
Panama GDP: $63.61 billion Population: 4,351,267
The Central American country uses the dollar alongside its local currency. The Panamanian Balboa is pegged 1-for-1 to the greenback and only issued in the form of coins. This structure has been established since 1904 after Panama claimed independence.
El Salvador GDP: $28.74 billion Population: 6,314,167
The US currency replaced El Salvador's colón in 2001, as a method of stabilizing its economy. More recently, the nation moved to also recognize bitcoin in 2021.
Zimbabwe GDP: $28.37 billion Population: 15,993,524
The greenback was used in 77% of transactions this year after the US dollar was reintroduced to rein in inflation caused by the local Zimbabwean dollar. This is the second time since 2009 that the US currency was brought in.
Earlier this month, the International Monetary Fund pushed Zimbabwe to take further action on its currency reforms, such as allowing the local tender to become free-floating.
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