Parallel Currencies and Dollarized Nations
W hen we visited Maldives a couple of years ago, we realized the US dollar is accepted as legal tender everywhere. Even though the country has its own currency, the Maldivian Rufiyaa. In her book, The Almighty Dollar , Dharshini David says there’s a name for this: “parallel currency”. One can see why tiny, tourist’y nations like Maldives would accept the dollar (it saves tourists the hassle and costs of conversions). Or why a country like Panama (think of all the fees in the Panama Canal) would do the same. But the dollar is also the parallel currency in countries where the local folks have no faith in their economy and/or government. Like Russia when the USSR collapsed. The same reason applies in several Latin American countries and Cambodia even today . Of course, a parallel currency also makes corruption and black money even more easy: transactions in the parallel currency never show up in the country’s financial systems. And then there are countries that have eliminate