Here’s why the BRICS currency will never work, say experts
While great in theory and a way out for South Africa’s ailing Rand, a BRICS Currency will never work, say experts. Here’s why …
Although it and the general de-dollarisation of global trade is a major topic at the 15th summit, experts say a BRICS currency will never work. And here’s why …
BRICS CURRENCY WILL NEVER WORK
A big talking point leading up to and at the summit has been unification and growth of the BRICS nations and a possible, long-talked-about BRICS currency. The argument being that BRICS currently represents a massive percentage of the global population – 3 billion people or roughly 40%. And it should not be so highly dependent on the dollar as the currency for international trade.
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This concept of a BRICS currency has been spearheaded by Brazil and Russia, the latter has been isolated and sanctioned after their illegal invasion of Ukraine. However, experts are saying a BRICS currency will never work for the following reasons.
US DOLLAR CONTROLS TRADE
As reported by Business Tech, Future Forex CEO, Harry Scherzer, says three quarters, 75%, of all foreign trade is currently conducted in US Dollars. And just because the East/Global South wants to de-dollarise, doesn’t means it’s going to happen easily.
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Scherzer said that a BRICS currency will never work purely because it would be extremely difficult to put into place and manage. “There needs to be an alignment of monetary policy and of interest rates which is pretty tough when you have nations with such hugely differing populations and economic circumstances,” said Scherzer.
WHAT ABOUT THE EURO?
The thing that worked in the Euro’s favour was that all the countries are on the same continent and with broadly comparable economies. Amongst them powerhouses like Germany, Switzerland, France.
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A BRICS currency will never work because it would have to unite multiple and hugely different economies operating in different parts of the world under unique circumstances, concluded Scherzer.
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This is a sentiment seconded by the Lord Jim O’Neill, the economist who coined the phrase BRICS back in 2001 after identifying its global potential. “The dollar’s role is not ideal for the way the world has evolved. You’ve got all these economies who live on this cyclical never-ending twist of whatever the US Federal Reserve decides to do in their own interest.”
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However, there would need to be a central bank of sorts to regulate the currency, said O’Neill. More likely to come out of the 15th BRICS Summit are resolutions to move away from the dollar as a traded currency. By reducing dependence on the dollar, the BRICS bloc will have its own space to trade globally.
DE-DOLLARISATION
The BRICS currency may never work, but the bloc is looking for a payment and settlement system that will allow its members to buy whatever it needs in one country without having to consider dollar prices.
The 15th BRICS Summit takes place in Gauteng from August 22-24 2023 at the Sandton Convention Centre. We will bring you all the news as it takes place at the summit.