Business
BRICS Focuses on Local Currency Trade, Not Common Unit, Amid De-dollarisation Push
While India's MEA confirms no immediate plans for a shared BRICS currency, the bloc's New Development Bank is facilitating more loans in local denominations, pushing away from US dollar reliance.
The BRICS group of nations is not currently considering a proposal for a common currency, India's Ministry of External Affairs (MEA) has stated, clarifying the bloc's immediate financial priorities. Instead, the emphasis remains firmly on enhancing bilateral trade settlements using local currencies and integrating national payment systems among member states.
This position comes amidst broader discussions within the BRICS framework regarding de-dollarisation – a movement to reduce global reliance on the US dollar in international trade and finance. While a unified currency is not on the agenda, practical steps are being taken to advance this goal. The New Development Bank (NDB), established by BRICS, plays a crucial role by increasingly offering loans in the local currencies of the countries where projects are being financed. This approach allows the bank to provide financial support without primarily depending on the US dollar, thereby empowering member nations to conduct more of their economic activities in their own denominations.
The issue of de-dollarisation has been a central theme in recent BRICS dialogues, including the BRICS Business Forum. Statements from leaders such as Iranian President Masoud Pezeshkian and Russian President Vladimir Putin at this forum underscored the ongoing significance of this debate for the bloc's economic future. These discussions highlight a shared aspiration among BRICS members to foster a more diversified global financial architecture.
India has been an active proponent of these efforts, particularly advocating for the linking of payment systems and the settlement of bilateral trade in local currencies. This strategy aligns with the broader objective of strengthening economic resilience within the bloc and reducing exposure to fluctuations in major international currencies. By encouraging direct trade in national currencies, member states aim to streamline transactions and minimise exchange rate risks.
The current strategy adopted by BRICS reflects a cautious yet deliberate approach to financial reform. Rather than pursuing the complex and potentially challenging path of creating a common currency, the bloc is focusing on pragmatic measures that incrementally bolster the use of local currencies in trade and development finance. This incremental shift is intended to gradually diminish the dominance of the US dollar, fostering a more multipolar global economic system without a radical overhaul of existing monetary frameworks.
Reporting by the The Indian Morning Post Editorial Desk.
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