De-dollarisation, a single unified BRICS currency not on the cards

For months, there has been speculation that BRICS nations are looking to move away from trading US dollars in favour of local currencies and even a single unified currency backed by gold.

But this could not be further from the truth. BRICS and its member states are increasingly using local currencies for trade instead of the dollar.

During a briefing on problems relating to neocolonialism hosted by the All-Russian Political Party’s Andrey Klimov, the topic of a single unified BRICS currency was briefly touched upon.

Klimov said BRICS had special tools, such as the foundation of reserve currencies and the bloc’s New Development Bank in place to encourage member states to trade in national currency.

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“A Unified currency that can be used by all nations can be observed in only one place, the European Union. I am not confident that this experience was very positive for them. That is why when we speak about countries such as China, South Africa, Brazil…I do not think these nations are interested in losing their national currencies,” said Klimov.

“At this stage in humanity it is better to find the fair and advanced forums of transaction using national currencies and special currency reserves. This is what Russia is working at,” he added.

Next year, when Russia takes over the BRICS chairmanship from South Africa, plans to accelerate de-dollarisation, in favour of trading in national currencies over the US dollar.

Transactions between BRICS member states China and Russia amount to some $200 billion, but these transactions are now occurring in the national currencies.

Klimov said the global financial ecosystem remains firmly entrenched in the dollar because that is how world trade took place all this time.

“The US as a result of their dollar monopoly, they export their inflation. Their inflation is sold to other countries and as soon as their inflation stops, the global market will normalise.”

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The US dollar

A combination of factors, including demand and supply, interest rates, economic and political stability, market speculation, and foreign exchange reserves, determine the dollar’s value.

While a physical asset does not back it, its value is maintained through market forces and the confidence of its users.

According to the US Federal Reserve, the US dollar is the most frequently used currency in global trade. In 2019, the dollar accounted for 96% of trade invoicing in the Americas, 74% in the Asia-Pacific region, and 79% in the rest of the world.

The US dollar is involved in nearly 90% of global foreign exchange transactions, making it the most traded currency in the foreign exchange market.

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