The BRICS And The End of The US Dollar Hegemony?

 By Yusuf Nasir Ahmad.

Naseeryusuf07@gmail.com. 

“Science…never solves a problem without creating ten more.” -George Barnard Shaw.

 

The BRICS nations, Brazil, Russia, India, China, and South Africa, have been gaining economic power and influence in the world in recent years. As their economies continue to grow and become more interconnected, some experts believe that the US dollar's status as the dominant global currency could be challenged.

The US dollar has been the dominant global currency for decades, with many international transactions and investments being denominated in dollars. This has given the United States significant economic power and influence, as well as the ability to impose economic sanctions on other countries by restricting their access to the global financial system.

Although, the USD has dominated global trade and capital flow for decades, with share of 59.8% of global central banks reserve a drop from 70% more than 20 years ago. While the Chines Yuan maintained global share of 2.8% of the global currency reserve. However, the rise of the BRICS nations are changing the global economic landscape. These countries have a combined population of over 3 billion people and account for over 25% of global GDP. They have also been investing heavily in infrastructure, technology, and other industries, which has helped to spur economic growth and development.

According to the World Trade Organization (WTO), the BRICS nations (Brazil, Russia, India, China, and South Africa) accounted for around 21.7% of world merchandise exports in 2020. This represents a significant increase from their combined share of 6.1% in 2000.

It is important to note that the percentage of world export control by the BRICS nations may vary by country and product. For example, China accounts for the largest share of BRICS exports and is the world's largest exporter overall, while the other BRICS countries have smaller shares of world exports. Additionally, the specific products and industries in which the BRICS countries have a larger share of exports may differ.

Despite this, the increasing role of the BRICS nations in global trade is undeniable, and they are likely to continue to play a significant role in shaping global trade patterns and policies. The BRICS nations have sought to promote greater South-South cooperation in trade and investment, reducing their dependence on developed nations and creating new opportunities for trade and investment among themselves and with other developing countries. This could lead to new trade relationships and opportunities for businesses and consumers around the world.

 

The South Africa's ambassador to BRICS in an interview in the city on Monday ahead of the June Summit in South Africa disclosed that "Thirteen countries have formally asked to join and another six have asked informally. We are getting applications to join every day." Since its formation as the BRIC in 2006, the group has only admitted one new member – South Africa in 2010. Saudi Arabia and Iran are among the countries who've formally asked to join.

In recent years, there have been several moves by the BRICS nations to challenge the dominance of the US dollar. For example, China has been promoting the use of its own currency, the Yuan, in international trade and investment. The country has also been working to establish its own international payment system, which would reduce its dependence on the US-dominated SWIFT system.

Russia and India have also been reducing their reliance on the US dollar. In 2019, Russia reduced its holdings of US Treasury bonds to a 12-year low, while India has been promoting the use of its own currency, the rupee, in regional trade.

Brazil and South Africa have also been exploring ways to reduce their dependence on the US dollar. In 2020, Brazil signed a currency swap agreement with China, allowing the two countries to trade in their own currencies instead of using the US dollar. South Africa has also been promoting the use of the rand in regional trade and investment.

While the US dollar is still the dominant global currency, the rise of the BRICS nations is likely to continue to challenge its hegemony. As these countries become more integrated into the global economy and more confident in their economic power, they are likely to seek greater autonomy in international financial transactions. This could lead to a shift away from the US dollar and towards other currencies, such as the Yuan or the euro.

WHAT WILL A BREAKTHROUGH BY THE BRICS NATIONS MEANS TO THE INTERNATIONAL TRADE?

A breakthrough by the BRICKS nations could have significant implications for international trade. Like we previously established, as these countries continue to grow in economic power and influence, they are likely to seek greater autonomy in international financial transactions, reducing their dependence on the US dollar and other traditional currencies.

If the BRICKS nations are successful in promoting their own currencies for international trade and investment, this could lead to a shift away from the US dollar and towards other currencies, such as the Yuan, Rupee, or the Russian Ruble (RUB). This could also reduce the dominance of Western banks and financial institutions in international trade and investment, as the BRICS nations seek to establish their own financial infrastructure and institutions.

Furthermore, a breakthrough by the BRICKS nations could lead to increased South-South cooperation in trade and investment. As these countries seek to reduce their dependence on developed nations, they are likely to increase trade and investment among themselves and with other developing countries. This could create new opportunities for trade and investment, particularly in sectors such as infrastructure, technology, and renewable energy.

However, it is important to note that a breakthrough by the BRICS nations would not necessarily lead to a complete overhaul of the global economic system. The US dollar is still the dominant global currency, and the BRICS nations are likely to face significant challenges in establishing their own currencies and financial infrastructure. Additionally, international trade and investment are governed by complex regulations and agreements, which can be difficult to navigate.

 

 

In conclusion, the BRICS nations are increasingly challenging the dominance of the US dollar in the global financial system. As their economies continue to grow and become more interconnected, they are likely to seek greater autonomy in international financial transactions, which could lead to a shift away from the US dollar. While the US dollar is still the dominant global currency, its hegemony is no longer as secure as it once was, and the rise of the BRICS nations is likely to be a significant factor in its future. However, it is important to recognize the challenges and complexities involved in establishing new financial infrastructure and institutions, and the impact of the BRICKS nations on the global economic system is likely to be gradual rather than sudden.