South Africa, which is hosting the 15th Brics summit in Johannesburg this week, will use the gathering to push for Brics countries to use their own currencies when trading with one another as a mechanism to push for the reform of global political and financial institutions.
This is not a new agenda but a continuation of previous Brics declarations and initiatives. For example, the Brics New Development Bank and the Contingent Reserve Arrangement were established in 2014 to provide alternative sources of financing and liquidity for Brics countries and other emerging economies.
But it is a call that has long been ignored by world superpowers, including the US, UK, France and Germany, who play a dominant role in global governance institutions such as the UN Security Council, the World Bank and the International Monetary Fund.
“The engagement is on reforming global financial architecture. What is being discussed is modes of using our own currencies when trading with each other,” a senior diplomatic source said on Monday.
The source added “there is no talk of a common currency” in regard to the de-dollarisation debate on the eve of the Brics summit at the Sandton International Convention Centre from Tuesday to Thursday.
Business Day reported in July sanctions imposed on Russia by the US, EU, UK and Canada due to the war in Ukraine had accelerated talks among Brics member states to lessen their reliance on the dollar for trade.
Brics representative in South Africa Anil Sooklal said at the time discussions at the summit would expand on addressing the idea of deepening interaction in trading in local currencies because “countries want to have greater flexibility and less dependent on the dollar”.
“What we have said is we need to trade in our local currencies … the days of a dollar-centric world are over and that’s a reality. We have a multipolar global trading system far different from the trading system of 20 years ago,” Sooklal said.
India’s foreign secretary Vinay Mohan Kwatra reportedly said on Monday the Brics deliberations focused on boosting trade in national currencies instead of developing a common currency.
“The discussion framework in Brics and the substance of that discussion framework ... [has] focused principally on trade within national currencies,” he was quoted as saying.
Writing in Business Day on Monday, William Gumede, associate professor at the Wits School of Governance and author of SA in Brics, said a common currency between countries was not “practical, feasible or implementable” in the short-term, given the bloc’s divergent monetary regimes, the poor convertibility of individual country currencies and that intratrade areas were still relatively small.
“A Brics currency will also require a Brics central bank, commonality in monetary policy, alignment of fiscal policies and synergy between political regimes across the trade bloc. Yet, as things stand, the Brics currencies have mismatched central banking regimes and are not easily convertible — unlike the EU, when the euro was established,” Gumede noted.
“China and Russia’s central banks are state-controlled, whereas South Africa, India and Brazil have independent central banks. A big question is whether China or Russia would surrender sovereignty over their national currencies, which would be crucial to the success of a common currency.”
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