The BRICS Currency: A New Global Currency Order?

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Awais Khan

The BRICS currency is a proposed common currency for the BRICS countries: Brazil, Russia, India, China, and South Africa. The idea of a BRICS currency has been discussed for many years, but there is no concrete plan to create it yet.

What is the BRICS currency?

The BRICS currency would be a basket currency, meaning that it would be made up of the currencies of the BRICS countries. The exact composition of the basket would be determined by the BRICS countries, but it would likely be weighted according to the size of each country's economy.

According to Swaran Singh, Professor of International Relations at Jawaharlal Nehru University, enormous efforts has been made for using local currencies, because number of countries are not comfortable with the dollars as being used by Western Nations in both levelling sanctions and putting nations out of the swift system.

So, he said, India, of course, stands together with BRICS nations in exploring use of increasingly local currencies and potentially launching a BRICS currency.

Singh further clarified that this is not going to undermine dollar but creating an alternative to have one more option, just like euro as an international currency.

According to Singh, this is to give more options to the countries, so that they could not be held hostage.

Who are the members of the BRICS currency?

The members of the BRICS currency would be the BRICS countries: Brazil, Russia, India, China, and South Africa. These countries are all major emerging economies with significant economic weight.

They are also all located in different parts of the world, which would give the BRICS currency a global reach.

What is the basis of the BRICS currency?

The basis of the BRICS currency would be the currencies of the BRICS countries. The exact composition of the basket would be determined by the BRICS countries, but it would likely be weighted according to the size of each country's economy.

The BRICS currency would be backed by the combined foreign reserves of the BRICS countries.

Why is a BRICS currency being considered?

There are several reasons why a BRICS currency is being considered. One reason is to reduce the reliance of the BRICS countries on the US dollar.

According to an article published in Fortune, the BRICS nations have been pursuing a wide range of initiatives to decrease their dependence on the dollar.

From the last year, Russia, China and Brazil have turned to greater use of non-dollar currencies in their cross-border transactions. Similarly, Iraq, Saudi Arabia and the UAE are significantly exploring alternatives to dollar currency. And central banks have sought to shift more of their currency reserves away from the dollar and into gold.

India and Bangladesh in their recent purchase from Russia have transacted in local currencies. Pakistan has also purchased oil from Russia in local currency.

Furthermore, The US dollar is currently the world's reserve currency, which means that it is used in most international transactions.

This gives the US a lot of power over the global economy. A BRICS currency would give the BRICS countries more control over their own economies.

Another reason for a BRICS currency is to promote trade between the BRICS countries. Currently, most trade between the BRICS countries is conducted in US dollars.

A BRICS currency would make it easier and cheaper for the BRICS countries to trade with each other.

Finally, a BRICS currency could help to stabilize the global economy. The US dollar has been losing its value in recent years, which has made it more difficult for countries to borrow money.

A BRICS currency could provide an alternative to the US dollar and help to stabilize the global financial system.

Recent developments

In recent years, there has been renewed interest in the idea of a BRICS currency. This is due to a number of factors, including the US-China trade war, the war in Ukraine, and the global financial crisis.

In 2022, the BRICS countries announced the creation of a new payment system called BRICS Pay. BRICS Pay is designed to facilitate trade between the BRICS countries without the need to use the US dollar.

The BRICS countries are also considering creating a reserve currency called the BRICS Contingent Reserve Arrangement (CRA).

The CRA would be a pool of money that the BRICS countries could use to help each other in times of financial crisis.

The creation of a BRICS currency is still a long way off, but it is a proposal that is gaining increasing attention. The BRICS nations are hoping that a BRICS currency could help to reduce their reliance on the US dollar, promote trade between them, and stabilize the global economy.

What are the Prospects and Challenges of BRICS Currency?

Here are some of the advantages of the BRICS currency:

Diversification away from the US dollar: The US dollar is currently the world's reserve currency, which means that it is used in most international transactions. This gives the US a lot of power over the global economy. A BRICS currency would give the BRICS countries more control over their own economies by allowing them to trade with each other without using the US dollar.

Increased stability for the global economy: The US dollar has been losing its value in recent years, which has made it more difficult for countries to borrow money. A BRICS currency could provide an alternative to the US dollar and help to stabilize the global financial system.

Reduced reliance on foreign debt: The BRICS countries are all heavily indebted to the US and other developed countries. A BRICS currency could help to reduce this debt by making it easier for the BRICS countries to trade with each other and by providing them with a more stable currency.

In addition to these advantages, a BRICS currency could also help to promote economic growth and development in the BRICS countries. By making it easier for the BRICS countries to trade with each other, a BRICS currency could boost intra-BRICS trade and investment.

This could lead to increased economic growth and development in the BRICS countries.

However, there are also some challenges that would need to be addressed before a BRICS currency could be created. These challenges include:

Political will: The BRICS countries would need to be willing to cooperate and agree on the terms of a BRICS currency. This could be difficult, as the BRICS countries have different political and economic systems.

Technical challenges: There would be technical challenges involved in creating a BRICS currency, such as determining the basket of currencies that would make up the currency and setting up a clearinghouse to facilitate transactions.

Acceptance by the international community: The BRICS currency would need to be accepted by the international community in order to be successful. This could be difficult, as the US dollar is currently the world's reserve currency and is widely accepted.

Despite these challenges, the potential advantages of a BRICS currency could make it a worthwhile endeavor for the BRICS countries.

The BRICS countries should continue to explore the possibility of creating a BRICS currency and work to address the challenges that would need to be overcome.

The future of the BRICS currency?

The future of the BRICS currency is uncertain. There are a number of factors that could influence whether or not a BRICS currency is created, including the political will of the BRICS countries, the technical challenges involved, and the acceptance by the international community.

By reducing their reliance on the US dollar, promoting trade between them, and stabilizing the global economy, a BRICS currency could have a significant impact on the global financial system.

The BRICS countries have been discussing the possibility of creating a BRICS currency for many years, but there is no concrete plan to create it yet.

However, the recent developments, such as the creation of BRICS Pay and the BRICS Contingent Reserve Arrangement, suggest that the BRICS countries are serious about exploring this option.

Only time will tell whether or not a BRICS currency will be created.

The BRICS countries are all facing different economic challenges. If the economic situation of one or more of the BRICS countries deteriorates, it could make it more difficult to create a BRICS currency.

The global political situation is also uncertain. If the political situation in the world deteriorates, it could make it more difficult to create a BRICS currency.

Overall, the future of the BRICS currency is uncertain. However, the potential benefits of such a currency could make it a worthwhile endeavor for the BRICS countries.

The writer is currently teaching economics at Higher Education and has done MPhil from PIDE (Pakistan Institute of Development Economics).