- BRICS (Brazil, Russia, India, China, South Africa) coalition is contemplating the creation of a common currency in the medium to long term, but immediate implementation is not planned.
- The BRICS bloc aims to conduct more trade in local currencies, seeking to reduce reliance on the dollar, however the feasibility of a reserve currency to challenge the dollar is still distant.
The BRICS (Brazil, Russia, India, China, South Africa) consortium, a notable force in emerging markets, is harboring the notion of a globally recognized currency, rivaling the ubiquitous US dollar. Leslie Maasdorp, Vice President and Chief Financial Officer of the New Development Bank, a BRICS institution, clarified this ‘medium to long term ambition’ in a recent interview with Bloomberg TV’s Haslinda Amin.
Unraveling the BRICS Currency Proposition
Despite no immediate plans for its realization, the BRICS nations are striving for increased trade within their local currencies, a tactic aimed at reducing the dollar’s global dominance. This long-term ambition is an effort to counterbalance the existing sway that the US and its allies hold over key global financial institutions, including the International Monetary Fund and the World Bank.
Maasdorp, however, tempered expectations, noting that even China’s Renminbi has a considerable journey ahead before it can challenge the status of the US dollar as a global reserve currency.
Central to BRICS’ strategy is the Shanghai-based New Development Bank, an institution holding $50 billion in subscribed capital, aiming to expand its membership and lending capabilities this year. Apart from the core BRICS countries, this bank counts Bangladesh and the United Arab Emirates as members, while Uruguay is in the process of joining and Saudi Arabia has applied for membership.
The New Development Bank has set a goal to allocate 40% of its lending to climate-related projects, emphasizing its commitment to sustainability while simultaneously exploring the idea of a new global currency. The vision of creating a ‘global bank anchored in emerging markets’ serves as a guiding principle for the institution, as it, and the BRICS bloc at large, continues to shape the contours of the future global economic landscape.