In this article, we will look at the 16 Countries that use the US Dollar in the world and also discuss the US dollar as the world’s reserve currency.
The US Dollar is the World’s Reserve Currency
The US dollar has been the world’s reserve currency since the Bretton Wood Agreement in 1944. A reserve currency is held by major central banks in large quantities and is used for investments, international trade, transactions, and to influence the domestic exchange rates of a country. Before the start of World War II, delegates from 44 Allied countries met in Bretton Wood to develop a system of foreign exchange. During this meeting, the Bretton Wood Agreement was signed and the delegation countries pegged the world’s currencies to the US dollar instead of the gold. According to the IMF, Currency Composition of the Official Foreign Exchange Reserve (COFER), 58.41% of the total foreign reserves around the globe were stored in US dollars in 2023. The foreign reserve share of the US dollar is more than the combined share of all other major currencies, including the Euro, Chinese, Renminbi, Japanese Yen, Pounds Sterling, and Canadian Dollar.
In addition to paper banknotes, a huge amount of official dollar reserves are held in the form of US Treasury Securities around the globe and are in high demand by both official and private investors. According to the US Federal Reserve, 31% of the marketable Treasury securities outstanding, amounting to $7.4 trillion, were held by foreign investors at the end of 2022. Moreover, the value of US dollar banknotes held by foreign investors has increased over the last two decades. According to the US Federal Reserve Bank, US banknotes worth more than $1 trillion were held by foreigners at the end of 2022. This value was roughly half of the total US dollar banknotes outstanding.
The US dollar being the reserve currency of the world is also a dominant and preferred currency for international trade and transactions. According to the US Federal Reserve, from 1999 to 2019, the dollar accounted for approximately 79% of the world’s trade invoices. On a regional level, the dollar accounted for 96% of the trade in the Americas and 74% in the Asia Pacific. It was however not the dominant trade currency in Europe, where the Euro dominated the trade invoices by holding a share of approximately 66%.
Is US Dollar Hegemony in Threat?
As discussed above, the US Dollar is the primary reserve currency of the world, however, its hegemony has come under question, especially after the Russia-Ukraine crisis. The US sanctions on Russia have left other countries questioning too much dependence on the dollar. Moreover, as interest rates rose across the globe, the US dollar became expensive for emerging nations. According to JPMorgan Chase & Co. (NYSE:JPM), in July 2023 Bolivia, a South American country decided to pay its import and export bills using the Chinese renminbi. Previously Brazil and Argentina, two other South American countries, had also decided to opt for the Chinese renminbi for international trade instead of the US dollar.
There are a few signs of marginal de-dollarization in the currency markets. Although the share of the US dollar in the total international federal reserves has remained well above the combined share of all other currencies, it has decreased over the last decade from 61.28% in 2013 to 58.41% in 2023. While no other currency has the global footprint to dethrone the US dollar from its position as the global reserve currency, China has been trying to internationalize its renminbi. The Chinese renminbi has improved its share in the total international federal reserves from 1.08% in 2016 to 2.29% in 2023, however, it remains below the shares of the Euro, Japanese yen, pound sterling, and the Canadian dollar.
On April 18, Reuters reported that Morgan Stanley (NYSE:MS) said, the dollar’s dominant currency status is likely to endure the rivalry with the Chinese, Russia-Ukraine crisis, and rising debt ceiling and debt levels, as other alternatives fall short as credible challengers. The report by Morgan Stanley (NYSE:MS) further stated that it did not expect the currency dominance to change soon, stating that the US dollar has a strong influence on the global economy and other financial metrics.
Now that we have discussed the role of the US dollar as the international reserve currency and the threats of de-dollarization let’s take a look at the 16 countries that use the US dollar in the world.
Our Methodology
To compile the list of 16 countries that use the US dollar in the world, we relied on the World Bank’s Development Indicator 4.16, Exchange rates and Prices. We looked at the DEC alternative conversion factor and official exchange rates and shortlisted countries that had an exchange rate of 1. Next, we searched the internet to ensure that the shortlisted countries used the US dollar as their official currency. We have ranked the countries that use the US dollar by their GDP at current prices, as of 2024.
Please note that the GDP at current prices was sourced from the IMF, however, for countries where the IMF had no data, we used the World Bank’s latest GDP figures. The year of the GDP has been mentioned for each country. We have also included the economic performance of the countries sourced from the financial institutions of the countries.
Note: The list also includes commonwealth and unincorporated territories of the United States and the United Kingdom.
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16 Countries that use the US Dollar in the World
16. Palau
GDP Current Prices (2024): $0.31 billion
Palau is situated in the Western Pacific Ocean. The country is characterized by its islands and other volcanoes that attract tourists from around the globe. Palau uses the US dollar as its official currency. According to the Asian Development Bank, the economy of Palau is forecasted to grow at 6.5% in 2024 and 8.0% in 2025. Inflation rates in the country are also forecasted to cool down from 5.5% during the current year to 1.0% in 2025. Regionally, Palau is one of the fastest-growing economies among the small island countries. It ranks as the 16th country that uses the US dollar in the world with a GDP of $0.31 billion as of 2024.
15. Marshall Islands
GDP Current Prices (2024): $0.31 billion
The Marshall Islands are a chain of volcanic islands in the Pacific Ocean. The country uses the US dollar as its official currency and signed a Compact of Free Association with the United States in 1983 to gain independence. Moreover, the Marshall Islands does not have a central bank of its own. According to the Asian Development Bank, the GDP of the country is forecasted to grow at 2.7% in 2024, however, the growth is expected to slow down in 2025 to 1.7%. On the bright side, the inflation rates in the country are falling. Inflation in the Marshall Islands was recorded to be 5.5% in 2024 and is forecasted to fall to 3.7% in 2025.
14. Federated States of Micronesia
GDP Current Prices (2024): $0.48 billion
Federated States of Micronesia is a country consisting of many islands spread across the Western Pacific Ocean. The official currency of Micronesia is the US dollar and the country ranks as the 14th country that uses the dollar in the world based on its GDP of $0.48 billion. According to the Asian Development Bank, the GDP of Micronesia is forecasted to grow at 3.1% in 2024, however, the growth is expected to slow down to 2.8% in 2025. Inflation rates for the country are expected to drop from 4.1% in 2024 to 3.5% in 2025. Regionally, the federated states of Micronesia rank in the middle as compared to other small island countries in the Pacific.
13. Northern Mariana Islands
GDP Current Prices (2020): $0.858 billion
The Northern Mariana Islands are a self-governing, commonwealth in association with the United States. The territory uses the US dollar as its official currency and had a GDP of $0.858 billion in 2020.
12. American Samoa
GDP Current Prices (2022): $0.871 billion
American Samoa is an unincorporated territory of the United States, the territory covers various islands and is situated in the south-central Pacific Ocean. The GDP of American Samoa increased by 1.8% in 2022 and was recorded to be $0.871 billion during the same year.
11. Turks and Caicos Islands
GDP Current Prices (2022): $1.14 billion
Turks and Caicos Islands is a British overseas territory in the West Indies. The island had a population of approximately 45,114 people in 2022. According to the official government figures by the Turks and Caicos Islands, the GDP of the territory expanded by 26.8% in 2020. The territory uses the US dollar as its official currency and ranks 11th on our list with a GDP of $1.14 billion in 2022.
10. Timor-Leste
GDP Current Prices (2024): $1.99 billion
Timor-Leste is a Southeast Asian country that ranks as the 10th country that uses the US dollar in the world. The country has a GDP of $1.99 billion as of 2024. According to the Asian Development Bank, the economy of Timor-Leste is forecasted to grow at 3.4% in 2024 and 4.1% in 2025. The inflation rates of the country are also slowing down and are expected to slow down from 3.5% in 2024 to 2.9% in 2025.
9. Virgin Islands (U.S.)
GDP Current Prices (2021): $4.44 billion
The Virgin Islands are unincorporated territories of the United States situated in the Caribbean Sea. The territory includes three main islands St. Croix, St. John, and St. Thomas. The Virgin Islands use the US dollar as their official currency and had a GDP of $4.44 billion in 2021.
8. Guam
GDP Current Prices (2021): $6.123 billion
Guam is an unincorporated territory of the US situated in Micronesia that uses the US dollar as its official currency. The territory ranks 8th on our list of countries that use the US dollar in the world and had a GDP of $6.123 billion in 2021.
7. Bermuda
GDP Current Prices (2022): $7.546 billion
Bermuda is a self-governing territory of the United Kingdom situated in the North Atlantic Ocean. Bermuda had a population of 63,532 in 2022 and a GDP current price of $7.546 billion during the same year. Although the official currency of Bermuda is the Bermudian Dollar (BMD), however, it is pegged to the US dollar at a ratio of 1:1, therefore the US dollar is used interchangeably throughout the country. It ranks as the 7th country that uses the US dollar in the world.
6. The Bahamas
GDP Current Prices (2024): $14.39 billion
The Bahamas is a North American country that ranks 6th on our list of countries that use the US dollar in the world. Although the country uses the Bahamian Dollar as its official currency, it is pegged to the US dollar at a ratio of 1:1, thereby the US dollar is widely used throughout the country. The Bahamas has a GDP of $14.39 billion as of 2024.
5. El Salvador
GDP Current Prices (2024): $35.33 billion
El Salvador is a Central American country that ranks 5th on our list of countries that use the US dollar in the world. The country uses the US dollar as its official currency and has a GDP of $35.33 billion as of 2024.
4. Panama
GDP Current Prices (2024): $87.35 billion
Panama is another North American country that ranks 4th on our list of countries that use the US dollar in the world. The country uses Panamanian Balboa (PAB) and the US dollar as its official currencies. According to the IMF, the country’s GDP grew at 2.5% in 2024 and the inflation rates are also under control at 1.7%. Panama has a GDP of $87.35 billion during the current year.
3. Puerto Rico
GDP Current Prices (2024): $117.76 billion
Puerto Rico is a self-governing commonwealth of the United States. It is situated in the West Indies and ranks 3rd on our list of countries that use the US dollar in the world. According to the IMF, the GDP of Puerto Rico contracted by -0.2% in 2024 and was recorded to be $117.76 billion. On the bright side, the inflation in the territory has been under control at a value of 1.9% in 2024. The territory has a population of 3.17 million as of the current year.
2. Ecuador
GDP Current Prices (2024): $121.59 billion
Ecuador is a South American country and is categorized as one of the most environmentally diverse countries. The country uses the US dollar as its official currency and ranks 2nd on our list of 16 countries that use the US dollar in the world. It has a GDP of $121.59 billion during the current year. According to the IMF, the GDP of Ecuador is forecasted to grow at 0.1% in 2024 and it has a population of 18.516 million.
1. United States
GDP Current Prices (2024): $28.78 trillion
The United States ranks as the biggest country that uses the US dollar in the world. The country has a GDP of $28.78 trillion and has a population of approximately 337.12 million people as of 2024. According to the IMF, the GDP of the United States is forecasted to grow at 2.7% in 2024. Moreover, the country has a GDP per capita of $85.37 thousand during the current year.
On March 28, Reuters reported that the US economy grew faster than the previous estimates for the fourth quarter. The GDP growth for the quarter was estimated at 3.4%. The stronger-than-expected growth of the country was attributed to strong consumer spending and business investments in the healthcare industrial sectors.
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