For many years, the US dollar has been the official currency for international commerce. However, there has recently been discussion of developing a new currency in order to replace the dollar and challenge the dollar’s hegemony. The situation worsens in 2022, when the world witnesses an unprecedented wave of sanctions on Russia. Of course, the main reason for the embargo is the Ukraine war.
However, the attack on the Russian currency posed a danger to other non-western economies, and nations are now nearing the de-dollarization phase to avoid such a destiny. The strategy has now grown so prevalent that it might be referred to as a currency war. This de-dollarization was accelerated on March 30, 2023, when Alexander Babakov, deputy head of the State Duma, said, “The transition to settlements in national currencies is the first step. The next one is to provide the circulation of digital or any other form of a fundamentally new currency in the nearest future. I think that at the coming BRICS Summit, the readiness to realize this project will be announced. Such works are underway.”
Moving ahead, the BRICS group, comprised of Brazil, Russia, India, China, and South Africa, is obviously discussing the creation of a new currency to promote trade. BRICS member countries account for more than 40% of the world population and almost a quarter of global GDP.
In recent months, the group has positioned itself as the Global South’s alternative to the G7. As a result, the introduction of the BRICS currency would undoubtedly elevate BRICS from an economic alliance to a crucial geopolitical alliance of the twenty-first century. Furthermore, numerous countries in West Asia and North Africa, notably Saudi Arabia and Algeria, have indicated interest in joining the union. Iran formally sought to join the BRICS last year. At the same time, the prolonged global economic crisis has resulted in a clear fall in foreign reserves.
However, the strength of the US currency isn’t only a problem that can be solved overnight; rather, the power of the dollar has the potential to impede the growth of new currencies. As a result, the destiny of the world’s currencies will be decided in the next days by a “currency war.”
Why The New Currency?
The concept of introducing a new BRICS currency does not originate from void, but rather combines both economic and strategic aspects that are primarily based on the world’s recent geopolitical scenario, as well as the direct effects or aftermath of a post-pandemic, war-affected, unprecedentedly polarised world.
In terms of the economic domain, the concept of the BRICS as a new currency is not a recent development. Because, from its inception, BRICS has been extremely aggressive in promoting commerce among BRICS nations using local currencies. As a result, if the BRICS countries follow forwards with their plan and create a new currency, it may assist stabilise their economies. It would imply improve customer confidence for a BRICS investment. This would result in increased expenditure and economic development.
– S. M. Saifee Islam is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).