BRICS Alliance & US Dollar Pressures
The BRICS Alliance, which encompasses Brazil, Russia, India, China, and South Africa, is gearing up to discuss the potential of using local currencies for cross-border transactions at their forthcoming August summit. Their overarching objective is to bolster their respective economies by prioritizing native currencies in international trade, effectively sidestepping the U.S. dollar. The member nations are convinced that transacting in local currencies within the bloc will not only be more efficient but will also prove to be cost-effective. Such a move is anticipated to catalyze business growth within the BRICS nations.
It’s crucial to note the evolving landscape of global foreign exchange reserves. In FY 2002-03, the U.S. dollar held an imposing 71% share. However, over the last two decades, its grip has loosened, representing just 59% of all foreign exchanges by 2023, a decline of 12%. BRICS is not merely observing this shift passively; they are actively accelerating the decline. The alliance is engaging with developing nations across Asia, Africa, and South America, advocating for a reduced reliance on the U.S. dollar in their trade practices.
If this trend of “de-dollarization,” championed by BRICS, continues unabated, we could witness a significant drop in the U.S. dollar’s share in foreign exchange reserves in the coming decades. Such a paradigm shift could empower BRICS to reshape global power structures and the financial order within the next 20 years.
