Like most countries in the Third World, Rwandans use the dollar as an unofficial currency. The money-brokers who hang out on streets are often the best placed to evaluate the balance among currencies, even though they do not have access to market data.
They are buying up the Chinese currency, the Renminbi and dumping the dollar. The dollar has been on a downward slide since the economic crisis began, partly to compete with Chinese exports and also due to the high federal debt.
Most African nations will suffer the effects of a weak dollar, as exports will most likely be lower this year, add to that effect of what forex we earn will be of lesser value.
The game is rigged against developing nations, the commodities we sell are in dollars, that makes a foreign currency more dominant than the local.
We now see an inevitable shift towards the Rmb, but convergence to the Chinese currency will not be easy.
The IMF values the Rmb at 3.8 to a 1$, whereas the official rate is around 6.85, therefore a nation which holds reserves of Rmb is holding double the real value.
We should now accept payment for exports in Rmb to give us twice the purchasing power of the dollar.
The dollar is used locally for a number of reasons, to pay for imports, to pay large amounts with fewer notes. Remittances have played a large role in cementing the dollars position in Africa.
A compromise is needed, commodities are still sold in dollars, our projects have been costed in dollars, and people are still mentally attached to the dollar.
China wants minimal disruption to the global trade system and is therefore happy to keep using dollars. They devalue their currency to make their exports cheap, this is something African nations have never managed to do because they lack capacity to produce more.
We should switch to the Renminbi as our currency for exports, we will still keep a certain percentage in dollars for local liquidity, but the bulk of our foreign currency should be Rmb.
I am not a sudden convert to this, it makes sense in the long run because the Chinese know their currency is worth more than the market rate. On day they will unveil the real value of the Rmb, and we better be on the right side of history.
Imagine having a chance to double the value of your exports? We have to use whatever value we gain to build infrastructure and not buy cheap goods.
African nations are realising that the “Dollar-game” is over, after independence our economies were oriented towards our former colonial masters. China does not want to float its currency on the global market because currency speculators will buy it, driving up the value and reducing its exports.
China must let African nations have the same financial safety that China enjoys; we must be able to use the Rmb as well. It would be mutually beneficial, and because it is inevitable, we might as well do it sooner than later.