BRICS, a rapidly expanding group of nine emerging economies led by Brazil, Russia, India, China and South Africa, joins many of its members in pledging US President-elect Donald Trump to abandon the idea of a common currency. Not likely. Officials say they are enthusiastic about the idea of currency cooperation and eventual de-dollarization.
“At the last BRICS summit held in Kazan in October 2024, many participants, including founding members, new members and even invited countries, were enthusiastically discussing alternative currencies to the US dollar. “This dependence is causing problems, including debt, for many countries, especially low-income countries in the Global South,” a person closely following the development told BusinessLine.
Despite President Trump’s tariff threat, it is unlikely that BRICS members will commit to de-dollarization or abandoning their plans for a common currency, but a BRICS currency is currently a remote possibility and will cost a lot of money. The official added that significant efforts are needed.
“No de-dollarization”
The next BRICS Sherpa meeting, likely to be held in Brazil in early 2025, could shed significant light on the issue as further discussions are expected on the de-dollarization plan announced in Kazan. the official said.
In early December, President Trump wrote on social media that he was done with the idea that the BRICS countries were moving away from the dollar while the US stood by.
“We demand a commitment from these countries not to create a new BRICS currency or support any other currency to replace the mighty US dollar. Say goodbye to selling to the American economy,” Trump wrote on his social media platform, Truth Social.
Immediately after Trump’s post, External Affairs Minister S. Jaishankar said that India has never wanted to de-dollarise and there is no proposal to have a BRICS currency at this time. “The BRICS are discussing financial transactions… The US is India’s biggest trading partner. We have no interest in a weak dollar.”
Former Reserve Bank of India (RBI) Governor Shaktikanta Das said at the same time that while India is not pursuing de-dollarization, recent steps aimed at promoting trade in its own currency pose risks to Indian trade. He said it was aimed at reducing the risk.
The envisioned BRICS currency is a notional currency, not a physical currency like the dollar, and it is unclear whether President Trump understands this, the sources said. This concept is called a “benchmark currency” because it is the base currency.
“It is almost impossible for BRICS to have a physical currency, and for that to happen, it is necessary to harmonize fiscal and monetary policies, as well as harmonize debt-to-GDP ratios. This is not possible due to the wide dispersion in the currency. However, benchmarking the currency is easily achieved,” the official explained.
Benchmark currencies indicate the value of products moving in the BRICS bloc, as they are benchmarked against the value of BRICS currencies. “Currently, the value of the BRICS currency will probably be determined by economically powerful countries like China, India, Brazil… There are only a few baskets of currencies that make up the BRICS currency. It needs to be discussed,” the official said.
At the Kazan summit, the bloc announced plans to potentially advance de-dollarization through several strategic projects and initiatives, including promoting trade in local currencies, exploring a common payments infrastructure, and developing a BRICS grain exchange. did.
