## Peru: Drivers of De-dollarization

_IMF Working Papers, July 1, 2010_

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**Canonical URL:** [Peru: Drivers of De-dollarization](https://www.imf.org/en/publications/wp/issues/2016/12/31/peru-drivers-of-de-dollarization-24059)

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## Bibliographic details
- Authors: Mercedes Garcia-Escribano
- Published: July 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455201808.001

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### Summary and key findings
- Peru has pursued a market-driven financial de-dollarization during the last decade.
- Dollarization of credit and deposit of commercial banks—across all sectors and maturities—has declined.
- Larger declines occurred for commercial credit and time and saving deposits.
- The paper’s analysis confirms that de-dollarization has been driven by:
  - macroeconomic stability;
  - introduction of prudential policies to better reflect currency risk (such as the management of reserve requirements);
  - development of the capital market in soles.

### Drivers of de-dollarization (analysis)
- Macroeconomic stability:
  - Identified as a primary driver enabling reduced reliance on foreign currency in the financial system.
- Prudential policies:
  - Introduction of measures that better reflect currency risk, including management of reserve requirements, contributed to de-dollarization.
- Capital market development in soles:
  - Development of domestic-currency capital markets supported substitution away from dollar-denominated instruments.

### Policy recommendations and further steps
- Given consolidated macroeconomic stability, greater exchange rate flexibility could foster further de-dollarization.
- Additional prudential measures could further discourage banks’ lending and funding in foreign currency.
- Further capital market development in domestic currency (soles) would help overall financial de-dollarization.
- Further de-dollarization efforts could focus on the three fronts identified: macroeconomic stability, prudential policy, and capital market development.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/peru-drivers-of-de-dollarization-24059_