This week’s BRICS conference in Johannesburg, South Africa, is hosting a gathering of international leaders. A new currency has been suggested by the BRICS group of five developing nations seeking to establish their own international trade and economic systems.
What is BRICS?
The initials of the term, BRICS, were created in 2001 by Jim O’Neill, a Goldman Sachs analyst who produced a study on rising economies. According to O’Neill, the GDP growth of the BRIC (Brazil, Russia, India, and China) nations would surpass that of the G7 nations.
The G7 nations, which include the U.S., Canada, France, Germany, Italy, Japan, and the U.K., are a collection of the most developed economies in the world.
O’Neill discovered that, towards the end of 2000, around 23.3% of the global GDP was made up of Brazil, Russia, India, and China. He predicted that the GDP of the BRIC nations would rise and suggested that the G7 nations take the BRIC nations’ participation into consideration.
In 2006, the original four nations came together in an unofficial alliance to support the global economy. South Africa joined the organization in 2011, and the abbreviation changed to BRICS.
The group estimates that BRICS contributes to about one-third of global economic activity, surpassing the G7 nations’ share of global GDP in 2023.
The BRICS summit, which will take place in Johannesburg, South Africa, this year, is anticipated to be the largest one yet, with 69 leaders invited.
The group established the BRICS Business Council, the Contingent Reserve Agreement, which offers short-term cash support, and the New Development Bank, which finances development initiatives in BRICS nations, with the goal of reshaping the political and economic landscape in their favour.
The theme of this year’s summit, which runs from August 22 to 24, is lessening global reliance on the US dollar.
Is BRICS creating a new currency?
According to the group, the BRICS nations seek to establish new economic and trade systems independent of the Western systems dominated by the United States.
The group is talking about de-dollarisation at this year’s summit, “aiming to reduce the reliance on the U.S. dollar and promote the use of national currencies in international trade.”
What justifies this? Other currencies are impacted by the U.S. dollar. According to the Associated Press, when the U.S. economy grows, the dollar also grows, which undermines other currencies.
In order to reduce their reliance on the dollar, the BRICS have talked about measures to increase trade between their nations.
But while the group has considered creating its own currency as part of the solution, that is not on the agenda for the summit, the group says.
The group first started discussing a new currency after the U.S. imposed sanctions on Russia in the wake of that country’s invasion of Ukraine. “A common currency among BRICS nations could lead to the establishment of stronger economic ties and new geopolitical alliances, further solidifying their position as a rising power de-dollarization coalition,” the group said.
What countries want to join BRICS?
While more than 40 have expressed interest, 22 countries have applied to join the BRICS. “This growing coalition is a testament to the increasing influence of BRICS in the international arena and its potential to shape the future of global finance,” the group claimed.
According to Reuters, among the nations that have expressed interest in joining the BRICS include Iran, Argentina, Saudi Arabia, the United Arab Emirates, Kazakhstan, Bolivia, Indonesia, Egypt, Ethiopia, Cuba, Algeria, the Democratic Republic of the Congo, Comoros, and Gabon.
These nations anticipate that their membership will provide them with more economic advantages than the existing Western trade and economic paradigm.
