The 16th BRICS leaders’ meeting will be held in Kazan, Russia, on Tuesday. Prime Minister Narendra Modi has left the summit. Compared with an influential group like the G7, the BRICS may not have a very long history, but at this summit, such a major decision was implemented, which may have a significant impact on the future. One of them is the BRICS currency.
The BRICS countries want to create a reserve currency that can compete with the dominance of the US dollar. At the BRICS Summit held in Kazan, Russia, from October 22 to 24, member states can discuss the introduction of gold to support the BRICS currencies.
Amid the trade war between the United States and China and the U.S. sanctions on China and Russia, if the BRICS countries agree to this new currency, it can also enhance the economic strength of these member countries while challenging the international financial system.
Currently, the US dollar dominates the international financial system. Nearly 90% of global trade is conducted in U.S. dollars. Meanwhile, so far, 100% of oil trades have been conducted exclusively in U.S. dollars, but last year it was reported that some oil trades also began to be conducted in non-U.S. dollars.
Why do BRICS countries want new currencies?
There are many reasons to want a new currency. Due to recent global financial challenges and aggressive U.S. foreign policy, the BRICS countries need a common new currency. The BRICS countries hope to create a new common currency for their economic benefit by reducing global dependence on the dollar and euro.
The need for this new currency was first discussed during the 14th BRICS leaders’ meeting in 2022. At that time, Russian President Vladimir Putin said that the BRICS countries were planning to launch a new global reserve currency. Thereafter, in April 2023, Brazilian President Luiz Inacio Lula da Silva, while supporting the BRICS currency proposal, stated why institutions like the BRICS Bank should have a new currency to Trade between Brazil and China, between Brazil and other BRICS countries? Wouldn’t that happen?
Anil Shukral, South Africa’s ambassador to the BRICS, said that 40 countries have expressed their desire to join the BRICS. Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates are invited to attend the 2023 BRICS Leaders’ Meeting as BRICS members. These countries will join the BRICS organization in January 2024.
How will BRICS currencies affect the US dollar?
For decades, the U.S. dollar has unilaterally dominated the world. According to data from the Federal Reserve, between 1999 and 2019, 96% of the United States’ international trade was denominated in US dollars, 74% of trade in the Asia-Pacific region was denominated in US dollars, and 79% of trade in the rest of the world was denominated in US dollars. Dollar.
However, in recent years, as the popularity of the euro and the yen has increased, the dollar’s reserve currency share has declined. But the U.S. dollar remains the most widely used currency in the world.
But experts believe that if the BRICS countries start using the new BRICS currencies instead of the U.S. dollar for trade, it could affect the United States’ power to impose sanctions. This will certainly lower the value of the dollar. This may also have domestic consequences in the United States.