The BRICS group of nations will discuss the feasibility of introducing a common currency, according to South Africa's foreign minister, Naledi Pandor.
Africa’s most advanced economy and a member of BRICS, which comprises Brazil, Russia, India, China and South Africa, will host the bloc’s 2023 summit in late August.
“It’s a matter we must discuss and discuss properly,” Bloomberg cited Pandor as saying on Thursday (May 11). “I don’t think we should always assume the idea will work, because economics is very difficult and you have to have regard to all countries, especially in a situation of low growth when you are emerging from crises.”
In April 2023 while visiting BRICS’ New Development Bank in China, Brazil’s President Luiz Inacio Lula da Silva urged the bloc to come up with an alternative to the greenback in foreign trade. China had previously voiced its support for the unit as well.
Bloomberg said US interest-rate hikes and geopolitical conflicts have pushed up the value of the American currency and all the commodities priced in it, to the detriment of most emerging markets. That’s spurred calls for alternatives to using the greenback as the global trading currency.
Silk Road Briefing, a think tank which articulates China’s foreign policy thrust - Belt and Road Initiative - says BRICS nations now account for 31.5% of global gross domestic product, higher than the 30% share of G7 nations – Canada, UK, US, France, Germany, Japan and Italy.
“The BRICS is expected to contribute over 50% of global GDP by 2030, with the proposed enlargement almost certainly bringing that forward,” it notes on its website.
BRICS represents more than 40% of the world’s population and several other nations, including Saudi Arabia and Iran, have expressed an interest in joining its ranks.
The discussion about a common currency for the bloc has been generated by BRICS and other nations questioning why they can’t use their own currencies, instead of the US dollar, to trade, Pandor said.
The summit has been overshadowed by a discussion over the attendance of Russian President Vladimir Putin, who is on an International Criminal Court arrest warrant over his alleged war crimes in his country’s conflict with Ukraine.
Any move towards the creation of a single form of legal tender would spur other debates about the creation of a single central bank and where it would be situated, said South African Reserve Bank (SARB) governor Lesetja Kganyago.
“I don’t know how we would talk of a currency issued by a bloc of countries that are in different geographical locations because currencies are national in nature,” he said on Wednesday, as quoted by Bloomberg. “For the euro area to arrive at that, they had to establish a treaty where the other countries had to all surrender their currencies.”
Johannesburg-based money managers, Vesact Ltd projects the dollar’s dominance to continue.
“No other currency has the recognizability, stability and economic might behind it,” it said in a note to clients. “The only currency that is vaguely close to being able to replace the dollar is the euro.”