The BRICS group of nations will discuss the feasibility of introducing a common currency, according to the foreign minister of South Africa, which is preparing to host a summit of the bloc\u2019s leaders.<\/p>\n
US interest-rate hikes and geopolitical conflicts have pushed up the value of the American currency and all the commodities priced in it, to the detriment of most emerging markets. That\u2019s spurred calls for alternatives to using the greenback as the global trading currency.<\/p>\n
One option is for the BRICS bloc \u2014 which comprises Brazil, Russia, India, China and South Africa \u2014 to adopt their own unit. The issue is likely be on the agenda of a meeting of the nations\u2019 heads of state in Johannesburg on Aug. 22.<\/p>\n
\u201cIt\u2019s a matter we must discuss and discuss properly,\u201d South African Minister of International Relations and Cooperation Naledi Pandor said in an interview in Cape Town on Tuesday.<\/p>\n
She said that without seeking to preempt the discussions, \u201cI don\u2019t think we should always assume the idea will work, because economics is very difficult and you have to have regard to all countries, especially in a situation of low growth when you are emerging from crises.\u201d<\/p>\n
BRICS represents more than 40% of the world\u2019s population and almost a third of global economic output, making it one of the world\u2019s most important economic blocs. Several other nations, including Saudi Arabia and Iran, have expressed an interest in joining its ranks.<\/p>\n
The discussion about a common currency for the bloc has been generated by BRICS and other nations questioning why they can\u2019t use their own currencies, instead of the US dollar, to trade, Pandor said.<\/p>\n
Any move toward the creation of a single form of legal tender would spur other debates about the creation of a single central bank and where it would be situated, said South African Reserve Bank Governor Lesetja Kganyago.<\/p>\n
\u201cI don\u2019t know how we would talk of a currency issued by a bloc of countries that are in different geographical locations because currencies are national in nature,\u201d he said in Johannesburg on Wednesday. \u201cFor the euro area to arrive at that, they had to establish a treaty where the other countries had to all surrender their currencies.\u201d<\/p>\n
BRICS nations passed the Group of Seven economies in 2020 by the purchasing power parity measure and last year were 4% larger. The IMF expects that gap to widen further this decade, even as the G-7 keeps its advantage when measured using market exchange rates.<\/p>\n
Growth in developing economies means a \u201cslow-moving\u201d decline in the dominance of the dollar, according to Ziad Daoud, chief emerging markets economist at Bloomberg Economics.<\/p>\n
Still, the dollar is likely to remain the dominant currency for \u201ca long time,\u201d according to Johannesburg-based money managers Vestact Ltd.<\/p>\n
\u201cNo other currency has the recognizability, stability and economic might behind it,\u201d it said in a note to clients. \u201cThe only currency that is vaguely close to being able to replace the dollar is the euro.\u201d<\/p>\n