BRICS Common Currency
BRICS countries will likely discuss the feasibility of a new common currency or similar at the 2023 BRICS summit in South Africa. Fair and easier international trade as well as a major reduction in costs of transactions would be some of the reasons why the countries could forge a currency union, according to Mikatekiso Kubayi, a BRICS specialist. Former White House senior advisor Joseph W. Sullivan writing for American magazine Foreign Policy asserted that “a BRICS-issued currency would be different. It’d be like a new union of up-and-coming discontents who, on the scale of GDP, now collectively outweigh not only the reigning hegemon, the United States, but the entire G-7 weight class put together.” Sullivan also mantains that the BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions because a BRICS currency union — unlike any before it — would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union.”
May 12, 2023 11:56 AM
The creation of a BRICS currency will be one of the main topics up for discussion when the group of five emerging nations – Brazil, Russia, India, China and South Africa — meet in Johannesburg in August, South African officials said this week.
Russia has been spearheading the push for the creation of a joint currency, and Brazil has also thrown its support behind the idea. China, too, is in favor of challenging what its ministry of foreign affairs calls U.S. “dollar hegemony.”
South Africa’s Foreign Minister Naledi Pandor has said a move away from the dollar could empower other countries, but also noted the project is challenging: “It’s a matter we must discuss and discuss properly. I don’t think we should always assume the idea will work, because economics is very difficult, and you have to have regard to all countries.”
Isaah Mhlanga, chief economist for Rand Merchant Bank, a South African investment bank, told VOA he thought the idea that a BRICS currency could upend the dollar’s dominance “any time soon” was “just not founded by any economic fundamentals that we know of.”
The U.S. dollar has been the world’s dominant currency since the end of World War II. Eighty percent of international transactions are conducted in U.S. dollars and nearly two-thirds of all currency reserves in central banks are in dollars. U.S. capital markets are also the most liquid in the world.
“South Africa really can’t play much of a role, it’s a very small open economy with very little reserves, which gets influenced by global factors. China might have a possibility but the willingness of the Chinese authorities to let the Chinese currency float freely and lose control is close to none,” he said.
Mhlanga also noted that given the different economic and political systems of the members of BRICS “it’s quite difficult to have a common currency.” He said although there has long been talk of a single currency for Africa, an actual economic framework for it is “still nowhere to be seen, it’s almost impossible.”
Most likely, he said, would be for individual member states to conduct more bilateral trade using their own currencies, as has already happened with Russia and India’s trade in oil.
South African Reserve Bank Governor Lesetja Kganyago also expressed some skepticism this week, saying that if a single form of legal tender were created by BRICS it would spur debate about the creation of a central bank and where that would be located.
“I don’t know how we would talk of a currency issued by a bloc of countries that are in different geographical locations because currencies are national in nature,” he said. “For the euro area to arrive at that, they had to establish a treaty where the other countries had to all surrender their currencies.”
BRICS: South African Minister Doubts if the New Currency Could Work
May 12, 2023
BRICS is looking to launch a new currency to settle international trade and sideline the U.S. dollar for transactions. The five-nations bloc is also buying massive amounts of gold and the new currency could be backed by the precious metal. The next summit will be held in South Africa in August and the leaders will combinedly decide on a new tender. The BRICS leaders are preemptively discussing the new currencies’ power and the move has been met with skepticism by South Africa’s Foreign Minister Naledi Pandor.
Pandor made it clear that BRICS leaders engaging in “preempting discussions” about the new currency could be disastrous. The South African minister doubted if the new currency could work as “economics is very difficult”. Pandor explained that growth could be slow and BRICS leaders could face challenges over time in scaling up the currency.
“I don’t think we should always assume the idea will work (BRICS currency) because economics is very difficult. And you have to have regard to all countries, especially in a situation of low growth when you are emerging from crises,” she said.
The Minister of International Relations and Cooperation cautioned leaders to stay away from preempting discussions about the new currency. “I don’t like preempting BRICS leaders’ discussions. It’s a matter we must discuss and discuss properly,” she said in an interview in Cape Town.