The Countries Relying on Foreign Currencies at Home

With the currency crisis in Argentina worsening, some observers have suggested the country swap its beleaguered currency, the peso, for U.S. dollars. The system of currency substitution has in fact helped other nations around the globe to stabilize their economies. In Latin America, Ecuador, El Salvador and Panama have all adopted the dollar as their currency – with mostly positive results.

More common around the world is the practice of pegging one’s currency – in a hard or soft peg – to the U.S. dollar. This practice is most common in states in and around the Arabian Peninsula, which had long pegged their currencies to the pound, but changed over to the U.S. dollar when the Bretton Woods System of international monetary management was discontinued in the 1970s. The Cuban convertible peso and the Venezuelan bolivar also have a history of being tied to the dollar, but these practices have since been discontinued.

As a second global currency, the Euro also has a large amount of countries pegging their currencies to it. This applies mainly to countries in Eastern Europe (where non-EU members Montenegro and Kosovo also use the Euro as a substitute currency) and – via the West African Franc and the Central African franc – in many countries in Africa. Finally, the South African rand as well as the Indian rupee serve as a peg to some of their immediate neighbors.

Counting microstates, which are mostly not included in the map, 33 countries used U.S. currency or pegged to the U.S. dollar in 2018 (conventional pegs and stabilized arrangements), compared to 25 for the Euro, according to the IMF.