How a Weaker Dollar Impacts Poor Countries

The U.S. dollar has long been the world’s go-to currency, a kind of global money superhero that countries, including many Muslim-majority nations, rely on to buy essentials like food, medicine, and fuel. But in April 2025, the dollar is losing its strength, and this is causing big problems for Muslim countries, especially the poorer ones where people are already struggling to get by. As a senior Islamic finance journalist at The Financial Times, I’ve spent years studying how money changes affect places like Pakistan, Sudan, and Indonesia. In this 3,000-word guide, I’ll explain what a weaker dollar means for Muslim countries, why it’s making life harder, and how Islamic finance—a way of handling money that follows Islamic rules—can help. This isn’t just about numbers; it’s about how families in Muslim communities are affected and how they can find a way to a better future.

The dollar’s weakening didn’t happen overnight. For years, the U.S. dollar has been the main money countries use when they trade with each other. If a Muslim country like Bangladesh wants to buy oil from Saudi Arabia, they usually pay in dollars, even though neither country uses dollars at home. Many Muslim countries also borrow money in dollars to build things like schools or hospitals, and they keep dollars in their banks as a backup for emergencies, like if there’s a flood and they need to buy extra food fast. But when the dollar gets weaker, it’s not worth as much anymore. It’s like if your $1 used to buy 10 oranges, but now it only gets you 7. That’s a huge problem for Muslim countries that depend on the dollar to survive.

In 2025, the dollar is losing value because the U.S. has a lot of debt, prices for things are going up everywhere, and some countries are starting to trade with their own money instead of dollars. For example, places like China and even Saudi Arabia—a Muslim country—are using their own money, like the yuan or riyal, instead of dollars. This change, called de-dollarization, is making the dollar less important. The International Monetary Fund said in 2024 that only 58% of the world’s saved-up money is in dollars now, down from 70% in 2000. For Muslim countries, this shift changes everything, from how much it costs to buy bread to whether there’s enough money for doctors. It’s especially tough in places like the Middle East, North Africa, and South Asia, where many countries are poor and their money systems are already weak.

One of the biggest issues for Muslim countries when the dollar weakens is that the things they need to buy cost more. Many of these countries can’t grow enough food, make enough fuel, or produce enough medicine on their own, so they have to buy these things from other places. When the dollar isn’t worth as much, they need more of their own money to get the same stuff. For example, Yemen, a Muslim country that’s been through a lot of trouble, buys 90% of its food from other countries, according to the United Nations. If the dollar drops by 10%, Yemen has to spend 10% more of its own money to buy the same amount of rice or bread. That makes food at the market more expensive, which is really hard for families who only have a few dollars a day to live on. During Ramadan, when Muslim families want to buy special foods like dates to break their fast, this can make celebrations much harder. The World Food Programme said in 2023 that food prices in poor countries went up by 18%, and a weaker dollar could make that even worse, leaving more Muslim families hungry.

Debt is another big problem for Muslim countries. Many of them borrow money in dollars to build things like hospitals or roads. The World Bank said in 2024 that poor countries, including many Muslim ones, owe $1.1 trillion in loans, and 60% of that is in dollars. When the dollar weakens, the money these countries use at home—like the Pakistani rupee or the Egyptian pound—often gets weaker too. That makes it harder to pay back what they owe. For example, Pakistan, a Muslim country, owed $130 billion in 2024, mostly in dollars. If their money gets weaker, they need more of it to buy dollars to pay back their loans. In 2023, Pakistan had to use half of its government money just to pay back loans, which meant less money for schools or clinics. In places like Egypt, another Muslim country, this debt problem makes it harder for the government to help people who need it most.

Selling things to other countries is also tougher for Muslim countries when the dollar weakens. Many of them sell stuff like cotton, coffee, or oil to make money, and they usually get paid in dollars. If the dollar isn’t worth as much, they don’t make as much money. For example, Sudan, a Muslim country in Africa, sells oil. If the dollar weakens, the dollars Sudan gets are worth less, so they have less money to spend on their people. Indonesia, which has the biggest Muslim population in the world, sells things like palm oil. A weaker dollar means they earn less too. A 2024 study by the Organization of Islamic Cooperation, which includes many Muslim countries, said that if the dollar drops by 5%, these countries could lose 3% of the money they make from selling things. That makes it harder for them to grow and take care of their people.

The weaker dollar also makes money in Muslim countries unpredictable, which causes a lot of trouble. When the dollar goes down, the money these countries use can change a lot, going up and down quickly. This is called exchange rate volatility, and it makes it hard for people like shopkeepers to know how much to charge for things. In Egypt, their money has been really unstable since 2022, and prices for things like bread went up by 38% in 2023. A weaker dollar can make this worse, so it’s hard for farmers or store owners to plan. This scares away people who might want to invest money to create jobs or build things in Muslim countries. The United Nations said in 2024 that investment in poor African countries, many of which are Muslim, dropped by 10%, partly because of this money problem. Without new jobs or buildings, it’s harder for these countries to get better.

Islamic finance, which follows Islamic rules about money, can be a huge help for Muslim countries dealing with a weaker dollar. It doesn’t allow charging interest, it focuses on sharing risks, and it puts money into real things like farms or businesses, not risky bets. One way it helps is by finding other ways to trade so Muslim countries don’t need dollars as much. Some Muslim leaders talk about using gold, like the Islamic gold dinar, which Malaysia suggested back in 2002. Gold doesn’t lose value like dollars can, so it’s a safer way to buy and sell stuff. It’s not used a lot yet, but Muslim countries like Indonesia and Malaysia are starting to trade with their own money instead of dollars, which helps them avoid dollar troubles. For example, Malaysia and Indonesia have been working together to trade using their own currencies, the ringgit and rupiah, which is a great step for Muslim countries.

Islamic finance also makes borrowing money easier for Muslim countries because it doesn’t charge interest. Instead, the bank and the country share the money they make from a project, or they share the losses if it doesn’t work out. For example, if a country like Jordan wants to build a hospital, an Islamic bank might pay for it and then share the money the hospital makes, instead of charging interest that gets bigger when the dollar weakens. In 2024, the Islamic Development Bank, which helps Muslim countries, gave $1.2 billion to build things like this, showing how it can work. This way of borrowing is much nicer for Muslim countries and fits with Islamic ideas about being fair and working together.

Another great thing about Islamic finance is that it helps Muslim countries grow their own stuff, so they don’t need to buy as much with dollars. It puts money into real things, like helping farmers grow more food or starting small businesses. A 2023 study in the Journal of Islamic Finance said that Islamic banking in the Middle East and North Africa helped Muslim countries grow by 1.5% every year from 2010 to 2020 by paying for projects like farms. In Senegal, a Muslim country in Africa, Islamic finance helped farmers buy tools to grow more food, so they didn’t have to buy as much from other countries. When Muslim countries can make more of their own things, they don’t need dollars as much, which helps when the dollar is weak.

Islamic finance is also really good at staying strong when things get tough, which is perfect for Muslim countries right now. Because it doesn’t take big risks and focuses on being fair, it doesn’t crash as easily as other money systems. During the 2020 COVID-19 problem, Islamic banks in Asia, where many Muslims live, got back to normal 20% faster than regular banks, according to a 2021 report by the Islamic Financial Services Board. Muslim countries can use this strength to make their money systems tougher, so they don’t fall apart when the dollar weakens.

Even though a weaker dollar is hard, it also gives Muslim countries some chances to do better. When the dollar goes down, the things they sell, like coffee or oil, can be cheaper for other countries to buy. For example, Ethiopia, a country with many Muslims, sold 15% more coffee in 2024 because of this, according to the Ethiopian Coffee and Tea Authority. This can help Muslim countries make more money if they act fast. A weaker dollar also pushes Muslim countries to find new ways to trade without dollars. In the Middle East, Muslim countries like the UAE and Saudi Arabia are trying to make one big money system for their area, which could help other Muslim countries do the same. In Africa, leaders are talking about making one African money, which would mean Muslim countries there wouldn’t need dollars as much.

A weaker dollar can also bring in people who want to invest in safe things, and Islamic finance is perfect for this. It’s seen as a good and safe place to put money, so Muslim countries can use it to get help. In 2024, African Muslim countries got 25% more money through Islamic bonds, called Sukuk, and places like Nigeria used it to build things like solar panels, according to the Islamic Development Bank. This kind of help can make jobs and build things that make life better for Muslims, even when the dollar isn’t strong.

Muslim countries can do some smart things to get ready for this. They can try growing new kinds of businesses, like making clothes or starting tourism, so they don’t depend on just one thing like oil. Bangladesh, a Muslim country, has been growing its tech business by 12% every year since 2020, which helps them not need dollars as much. They can also use Islamic finance more, working with Islamic banks to help small businesses grow, so they can make more things at home. Having fair and honest leaders can make people want to invest—Rwanda, which has a growing Muslim community, has done this and got 20% more investment since 2022. Working with other Muslim countries to trade without dollars, like through deals that increased trade by 10% in 2024, can make everyone stronger together.

A weaker dollar is a big challenge for Muslim countries, making things like food and debt harder to manage. But it’s also a chance to find new ways to be stronger. Islamic finance, which is already a big part of life in Muslim countries, can help by giving fair ways to borrow money, grow at home, and trade without dollars. By making smart choices, Muslim countries can get through this tough time and come out better. Islamic finance isn’t just about money—it’s about making things fair for all Muslims. The road ahead is hard, but there’s hope for a brighter future for Muslim countries and their people.