Multilateralism & Reforms: How BRICS Currency Offers ‘Better Deal for Global South’
08:21 12.07.2023 (Updated: 10:50 03.08.2023)
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The global economic turbulence of recent years has only amplified the failures of the Western financial system to address the needs of the Global South, creating new room for blocs such as BRICS (Brazil, Russia, India, China, South Africa) to offer alternatives, including new currencies for global trade, an expert told Sputnik.
Ashraf Patel, a senior research associate with the Institute for Global Dialogue and member of the South Africa BRICS Think Tank Network, told Sputnik on Tuesday “the geopolitical fractures are becoming more and more pronounced. The post-Covid world and the Ukraine-Russia conflict has seen a ‘new Cold War’ of sorts and many nations opting for non-alignment as well.”
“The US ‘trade wars’ with China and Russian sanctions, and the G7 push for ‘de-linking and de-risking’ shows a formal Western policy of ‘containment, very much along the lines of the Cold War period. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, as this would mean regional basket currencies and trading that can be de-linked from the dollar. In turn, this would have implications for the US and global economies.”
Patel noted Brazilian President Luiz Inacio Lula da Silva had recently expressed his support for a BRICS currency, asking: “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries?”
The official stated that at present, 89% of global trade and finance is “dollarized,” creating a huge imbalance. “And this model of international trade is financialized. This means that bond and stock markets, and financial instruments such as derivatives, are tools that dominate the trade and the currency trade market,” he said.
“This creates big problems for the Developing South- volatility and more debt, so it is essentially exploitative. Hence, gold is a solid commodity that has been used for centuries for world trade and a ‘safe investment’ through the ages. So the Gold standard aligned to BRICS Plus currency is a possible and potentially viable.”
“A new BRICS currency would also: strengthen economic integration within the BRICS Plus countries; reduce the influence of the US on the global stage; weaken the standing of the US dollar as a global reserve currency; encourage other countries to form alliances to develop regional currencies; and mitigate risks associated with global volatility due to unilateral measures and the diminution of dollar dependence,” he explained. “But the real challenge for Africa is the huge debt crisis currently.”
“The majority of low-income developing countries are today either already in or near debt distress. Meanwhile, the world’s two large economies, the US and China, are expected to see a jump in their public debt at higher levels than before the pandemic,” Patel noted. “Ghana and Sri Lanka defaulted on their external debt in 2022, two years after Zambia did. Pakistan and Egypt are on the verge of a default. On June 30, Pakistan secured a tentative $3 billion funding deal with the International Monetary Fund (IMF), promising it potential, short-term relief."
“Global public debt levels remain high – at 92% of gross domestic product (GDP) at the end of 2022. BRICS nations can come with a better debt management model as compared to G7 nations,” Patel said. “Earlier this year, the IMF, World Bank and the G20 set up the Global Sovereign Debt Roundtable (GSDR) to fix the common framework and speed up debt restructuring already facing delays. It is too early to tell if this G20 solution will succeed or not.”
Patel added that as “a political-military alliance rooted in Western world view and dominance of the neo-colonial order, and a pillar of the Cold War,” NATO “should have long been reduced.”
“The current Ukraine conflict has seen more EU members like Finland and Sweden seek membership and Ukraine, so the danger is a new Cold War," he said. “BRICS is vastly different and the focus is the promotion of multilateralism, the UN system and solid reforms of global finance, trade and investment. It seeks a more inclusive and perhaps alternative ‘order of priorities’ and a better deal for the Global South.”
