Carlos Fernandes Economist Alexis Habiyaremye of the University of Johannesburg has shared his perspective on the potential of a proposed unified BRICS currency, stating that it could “lessen the financial strain” on member nations by counterbalancing the “overwhelming edge the U.S. dollar possesses in the international financial framework.”
BRICS Currency: A Genuine Contender for Global Currency Status
In a recent interview with Putnik, Habiyaremye touched on the difficulties a common BRICS currency could pose to the supremacy of the U.S. dollar as the world’s reserve currency. An experienced researcher at the South African Research Chair in Industrial Development in the University of Johannesburg, Habiyaremye earned his Ph.D. in Economics and Policy Studies of Technical Change from the United Nations University/Maastricht University (UNU-MERIT).
Addressing the “overwhelming edge of the dollar in the international financial system,” Habiyaremye explained: “This extravagant privilege ensures other nations finance the U.S. deficit as the U.S. federal reserve can simply print money, while other nations have to create goods and services to gain access to dollars.”
The trend of countries decreasing their reliance on the U.S. dollar and instead focusing on their national currencies for trade settlements is growing. One significant initiative in this direction is being pursued by the BRICS nations (Brazil, Russia, India, China, and South Africa), who are considering a shared currency proposal to lessen their dependence on the USD. On the potential challenges a common BRICS currency could present to the U.S. dollar, Habiyaremye elaborated:
The launch of a new currency, if used consistently and effectively in all BRICS trade transactions, could relieve these countries from financing this extravagant privilege.
“Adopting a different currency would also allow these nations to bypass the unjust application of U.S. laws in their territories due to the extraterritoriality of the U.S. dollar,” he further explained.
Habiyaremye observed that the economic strength of the BRICS nations has already outstripped that of the Group of Seven (G7) countries in terms of purchasing power parity. He stated:
Considering their economic capacity, the BRICS currency has a real chance of achieving global currency status, provided the members commit to amplifying trade exchange amongst themselves.
“The BRICS nations have the capacity to produce most goods and services required in their international trade in terms of economic output,” he added.
However, Habiyaremye warned that “as long as each country continues to prioritize its trade exchanges with the U.S. (or its monetary allies) due to historical or political reasons, the BRICS currency will only remain a theoretical concept.”
In order to establish a new currency for the BRICS nations, Habiyaremye emphasized the need for political will among the leaders and substantial trade between the member countries to ensure economic feasibility.
“Wishing to detach from the dollar is not sufficient if the trade flows between the BRICS members or their immediate allies are not substantial enough to sustain the new currency,” he emphasized. Furthermore, the economist pointed out that most BRICS nations currently trade more with the U.S. or with nations that use the U.S. dollar than with each other, underlining that the potency of a new BRICS currency would hinge on increased intra-group trade.
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