New currency for South Africa, China, and India under fire

 ·24 Jan 2025

US President Donald Trump has doubled down on his tariff threat on BRICS nations, including South Africa, should they forge ahead with creating a new shared currency.

This threat, declared in his inaugural address, sent a clear message: any attempt to challenge the dominance of the US dollar will be met with severe economic consequences.

“If the BRICS nations want to do that, that’s okay, but we’re going to put at least a 100% tariff on the business they do with the United States,” Trump said, emphasising that any such actions would result in severe penalties.

He repeated that countries would face hefty tariffs even if they considered reducing the dollar’s role in global trade.

However, key players within the BRICS alliance have dispelled the idea of an imminent new currency.

Officials from South Africa and India have categorically denied any concrete plans for such a move, emphasising that discussions within the bloc have primarily centred on increasing trade using their own national currencies.

They argue that this approach aims to mitigate the impact of volatile foreign exchange markets and promote financial stability within the bloc.

In September, Finance Minister Enoch Godongwana said the BRICS group of developing market nations had yet to decide whether to introduce a common digital currency despite calls from within the bloc.

South Africa’s Department of International Relations and Cooperation further clarified that the current focus is not on “de-dollarisation” but on strengthening correspondent banking networks and developing infrastructure for settlements in national currencies.

Like Godongwana, India’s central bank chief said the so-called BRICS bloc had not decided to create a common currency to reduce the dollar’s usage.

“BRICS currency was an idea raised by one of the members and was discussed, but no decision has been made,” Reserve Bank of India Governor Shaktikanta Das said.

Despite these assurances, the idea of a BRICS digital currency continues to simmer.

Russia, in particular, has been actively promoting BRICS Pay, a new digital payments system that facilitates transactions within the bloc.

This system, recently tested at the BRICS Business Forum, showcases the bloc’s determination to explore alternative pathways for international trade and reduce reliance on the US dollar.

While the concept of a digital currency gains momentum, South Africa is exercising caution.

The National Treasury has stated that the country remains in the early stages of researching digital assets and has not yet committed to BRICS Pay.

This cautious approach reflects the complexity surrounding digital currencies and the potential challenges associated with their implementation.

South Africa recognises the need for thorough analysis and careful consideration before embracing such a significant shift in its financial landscape.

The President’s tariff threat has brought the debate over the US dollar’s global dominance to the forefront.

While BRICS nations explore avenues for greater financial independence, the potential repercussions of challenging the existing system loom large.

The bloc faces a delicate balancing act—navigating international trade while striving to create a more robust and resilient financial framework for its members.

The future of BRICS and its aspirations to reshape the global economic order remain uncertain as this high-stakes game of financial diplomacy unfolds.

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