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BRICS Efforts to Reduce Dollar Dependency Gain Momentum Ahead of Summit

An op-ed featured on Business Insider by Huileng Tan highlights the BRICS group’s ongoing initiatives aimed at diminishing reliance on the US dollar.

Last year, Brazilian President Luiz Inácio Lula da Silva proposed the idea of a common BRICS currency, though it met with skepticism from economists due to practical challenges.

Instead of pursuing a common currency, the BRICS bloc has focused on bolstering trade and lending in local currencies as a strategy to reduce dependence on the dollar.

According to Christopher Granville, managing director of global political research at GlobalData TS Lombard, discussions on this issue are expected to intensify during the upcoming BRICS summit in Kazan, Russia, scheduled for October 22-24.

The backdrop for these discussions includes escalating tensions between the US and China, exacerbated by secondary sanctions imposed by Washington on financial institutions involved in transactions with Russia, even if conducted in currencies like the Chinese yuan.

A pivotal development in this context is the growing interest among central banks in digital-currency transfers. Granville highlighted a potential solution involving a platform by the Bank for International Settlements (BIS), facilitating direct peer-to-peer settlements of commercial invoices and foreign-exchange trades using central-bank digital currencies (CBDCs).

These CBDCs, akin to cryptocurrencies but issued and backed by central banks, gained attention through a BIS trial in 2022 involving central banks from China, Hong Kong, the UAE, and Thailand. Although not yet operational, this platform represents a potential systemic shift towards reducing reliance on traditional dollar-dominated transactions.

SOURCE: Naija247news