BRICS has asked the New Development Bank (NDB), the Shanghai-based lender created by the group, to provide guidance on how a potential new common currency could operate and, in particular, how it could mitigate the impact of sanctions for member states.
The foreign ministers of the group gathered in Cape Town, South Africa, on Tuesday, among other things to discuss various issues on the intra-BRICS and international agenda, as well as ways of transforming the current global financial system so that it is fairer and provides equal opportunity for the whole world.
Even though there were no firm conclusions on the issue, one of the talking points was the use of alternative currencies as means of creating a shield against financial shocks, including those caused by unliteral sanctions.
"The BRICS nations are looking to ensure that we do not become victims to sanctions that have secondary effects on countries that have no involvement in issues that have led to those unilateral sanctions," said Naledi Pandor, South Africa’s minister of international relations and cooperation.
The minister noted that proposals on the creation of a new shared currency are being considered by officials of the New Development Bank, an international financial institution established in 2014 at the BRICS annual summit, and the group "will be guided to them as to what the future models might be."
Following the meeting, the foreign ministers issued a joint statement reiterating BRICS' commitment to encourage the use of local currencies in international trade.
"Ministers underscored the importance of encouraging the use of local currencies in international trade and financial transactions between BRICS as well as their trading partners," read the statement.
Earlier, Russian Foreign Minister Sergey Lavrov emphasized that transactions between countries in national currencies will have a "healing effect" on the global economy and international trade.
Last year, BRICS announced it is working on creating an alternative to the US dollar that would be backed by hard assets. Commenting on the issue, Brazilian President Luiz Inacio Lula da Silva recently stated that he dreams of a common currency for the BRICS member states so that his country would not need to use US dollars in foreign trade.
The NDB is an international lender that aims to mobilize resources for infrastructure and sustainable development projects in the BRICS member states and other emerging markets through the provision of loans, guarantees, and other financial instruments.
According to media reports, Argentina could join the NDB of the BRICS group of leading emerging nations as early as August. Bank President Dilma Rousseff told Argentine Economy Minister Sergio Massa that the bank's board of directors formally authorized a vote on the country's admission to the bank at the next meeting.