DE-DOLLARISATION
Could BRICS countries introduce their own currency for international trade? While there are efforts by the BRICS countries to reduce their dependency on the US dollar as the global reserve, experts cast doubt whether the process of de-dollarisation could actually help ease payment friction. Chris Menon
T
here has been much speculation recently regarding efforts by the BRICS countries (Brazil, Russia, India, China and South Africa), to reduce their dependence on the US dollar, the global reserve currency, a process known as de-dollarisation. Much of the speculation was fuelled by utterances from leaders of two of the countries themselves at the BRICS summit in August. Notably Brazil’s president, Luiz Inancio Lula da Silva called for the BRICS to create a common currency for trade and investment. While Russia’s president, Vladimir Putin, said: “The objective, irreversible process of de-dollarisation of our economic ties is gaining momentum.” But how serious a threat do their efforts pose to the dominance of the US dollar? Indeed, what is the real intention of the BRICS in the short and long-term? Are they planning to develop a new currency that will seek to end dollar dominance? What about developing an alternative payments system to rival Swift? Moreover, what might be the effects of de-dollarisation on payment friction? Would it really be a negative? Certainly, the BRICS are slowly becoming a force to be reckoned with, led
Winter 2023
by China. As the UNCTAD document, the BRICS Investment Report points out: “The changing absolute and relative economic weights of the BRICS economies over the past decade have transformed the shape of the global economy. “According to the World Bank, the share of BRICS in global GDP [Gross Domestic Product] grew from 18% in 2010 to 26% in 2021, with increases in all years during the period.” Of course, the stand-out performer among the BRICS is China which, as the report stresses, accounted for 70% of BRICS GDP in 2021.
There is no natural or smooth progression to another payments architecture in which there isn’t a lot of churn and damage.”
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