The BRICS is doubling down on its plan to use national currencies for global trade, sidelining the US dollar. The alliance, which now includes new members like Iran and UAE, is exploring ways to boost the use of their own currencies.
Iran, in particular, has come forward with a proposal to integrate national currencies for financial transactions between member countries. The proposal will be a hot topic at the upcoming BRICS summit.
Iran is pushing for a system that would prioritize national currencies in cross-border deals. They want a payment system that mimics the Western SWIFT network but focuses on the BRICS nations.
The goal is:- weaken the dominance of the US dollar in global finance. According to Russian Deputy Foreign Minister Andrey Rudenko:
“Various options related to integrating financial markets of the BRICS members, such as payments in national currencies and new mechanisms of mutual financial settlements, including those suggested by Iran are now being considered.”
How BRICS’ de-dollarization is going
Over the past five years, BRICS has expanded its reach and influence. The group now has 11 members, with recent additions Iran, Egypt, Ethiopia, and the UAE. This expansion has strengthened the bloc’s economic power.
The IMF predicts that by 2028, BRICS countries will account for nearly 38% of the world’s GDP, overtaking the G7. By developing their own financial systems, like the proposed BRICS Bridge, these countries are trying to create a new economic order.
The BRICS Bridge will connect member countries’ financial systems, enabling transactions in their respective digital currencies. Right now, nearly 90% of trade between Russia and China is now done in rubles or yuan.
Xi Jinping and Vladimir Putin
The trend is spreading, with the UAE and India also signing agreements to settle trade in their local currencies instead of the dollar.
The New Development Bank (NDB), formerly known as the BRICS Bank, has expanded its membership to include countries like Bangladesh, Egypt, and Uruguay.
But the US dollar still dominates global trade, accounting for about 90% of all currency trading. This makes it hard for BRICS currencies to gain traction.
Also, currencies in many BRICS countries are prone to devaluation and economic shocks, making them less reliable as stores of value.
Prime Minister Narendra Modi with President Vladimir Putin
Liquidity is another issue . BRICS currencies don’t yet have the widespread appeal and ease of trading that the dollar enjoys. While the BRICS alliance is united in its goal to reduce dependence on the US dollar, internal differences could arose.
Countries like India may be hesitant to take aggressive steps against America, which could slow down the alliance’s efforts.
