Mint Explainer: What is the battle over BRICS common currency?
Summary
- Economist Jim O’Neill has pointed out that political tensions between India and China would complicate any such efforts.
With the BRICS Summit around the corner, talk of the five member countries--Brazil, Russia, India, China, and South Africa--setting up a separate BRICS currency has started doing the rounds. Mint looks at the origins of this proposal, its prospects and the challenges involved.
– In April, Alexander Babavov, deputy speaker of the Russian Parliament, reportedly said that Russia, along with BRICS nations and African countries, was considering the creation of a new currency to challenge the dominance of the dollar.
– Same month, Brazilian president Lula da Silva publicly supported the idea of a BRICS currency to enable trade between member countries. This came as he also questioned the dollar’s pre-eminent standing in international trade and finance.
– Some experts have speculated that a BRICS currency may grow to challenge the dollar’s eminence in the global economy. All member countries are acutely aware that the dollar allows disproportionate economic power to countries like the US.
– This was made clear after a slew of sanctions were placed on Russia’s financial and banking system after its invasion of Ukraine. The “weaponisation" of the building blocks of global finance, like the SWIFT messaging system, have been viewed with unease in many capitals, including in New Delhi.
– However, this does not mean that India has supported the creation of a common BRICS currency. India’s external affairs minister S Jaishankar said as much in July when he stated that there was no idea for a BRICS currency.
– The chief financial officer of the New Development Bank, which is also known as the BRICS Bank, said in an interview that the grouping had no immediate plans for a common currency.
– Jim O’Neill, an economist and commentator, widely credited with popularizing the idea of BRICS in the early 2000s, savaged the idea that BRICS nations could establish a common currency. Among other things, O’Neill pointed out that political tensions between India and China would complicate any such efforts.
