BRICS bank to lend in local currencies of members: President

By Al Mayadeen English
Source: Agencies
22 Aug 2023 19:09

The much-awaited summit will mark the most impacting meeting the organization has held so far.

People walk past a banner outside the venue for the 2023 BRICS Summit at the Sandton Convention Centre in Sandton, Johannesburg, on August 20, 2023. (AFP)

During the BRICS summit in Johannesburg, South Africa's BRICS sherpa Anil Sooklal revealed as quoted by Sputnik that the five emerging economies eye strengthening trade using their respective local currencies, aiming for reduced dependence on the US dollar rather than pursuing a common currency.

Sooklal clarified that the discussions do not pertain to establishing a BRICS currency and emphasized the objective of fostering greater financial inclusion in global transactions and payments.

"The currency is being discussed but let me correct: It’s not about a BRICS currency. It is too early to talk about a BRICS currency," Anil Sooklal said.

"What we are talking about is creating more financial inclusion in terms of global financial transactions, global financial trade, and how we conduct our payment," he added.

The participating countries - Brazil, India, Russia, China, and South Africa - will engage in talks to enhance their interaction using local currencies, Sooklal said.

The ambassador stressed the importance of enabling borrowing and payment settlements in their own currencies to mitigate losses from currency conversion and decrease reliance on the dollar and euro.

Sooklal highlighted a growing momentum in the global financial architecture, with nations advocating for trading and conducting business in their local currencies, extending beyond BRICS to encompass countries from the Global South, including Africa.

Notably, African central banks have initiated a pan-African payment system that is projected to annually save African nations approximately $5 billion in currency conversion expenses. This shift toward reduced reliance on the US dollar aligns with South Africa Deputy President Paul Mashatile's affirmation that prioritizing independence from the dollar would feature prominently in the bloc's discussions.

NDB aims to decrease global reliance on US dollar

In the same context, the New Development Bank (NDB) of BRICS intends to initiate lending in the South African rand and Brazilian real, aiming to decrease global reliance on the US dollar, a report by the Financial Times revealed.

On her account, Dilma Rousseff, former Brazilian President and head of the NDB, emphasized the bank's goal to establish a more multipolar global financial system by implementing lending in local currencies.

Rousseff stated that around 30% of the bank's lending would be conducted in local currencies, particularly the South African rand and Brazilian real. Loans would be provided in the respective national currencies.

"We're going to try to either do a currency swap or issue debt. And also in rupees," she said as quoted by the Financial Times.

It is worth noting that the NDB, headquartered in Shanghai, was founded in 2014 by Brazil, Russia, India, China, and South Africa. It was subsequently joined by Bangladesh, the United Arab Emirates, and Egypt, with Uruguay currently in the process of becoming a member. The NDB's primary objective is to mobilize resources for infrastructure and sustainable development projects in emerging markets and developing nations. The bank has approved financing estimated at $30 billion, with 40% of the funds allocated to initiatives contributing to climate change mitigation, adaptation, and energy transition.

On his account, Indian Prime Minister Narendra Modi stated that the BRICS summit in South Africa will offer a forum for addressing challenges faced by the Global South region.

Leaving for South Africa to take part in the BRICS Summit being held in Johannesburg. I will also take part in the BRICS-Africa Outreach and BRICS Plus Dialogue events. The Summit will give the platform to discuss issues of concern for the Global South and other areas of…
— Narendra Modi (@narendramodi) August 22, 2023

Ahead of his participation in the BRICS Summit held in Johannesburg, Modi shared on X, formerly known as Twitter, that he will also engage in BRICS-Africa Outreach and BRICS Plus Dialogue events.

It is worth noting that the BRICS group, composed of significant emerging economies - Brazil, Russia, India, China, and South Africa - will convene a summit in Johannesburg from August 22-24. The summit's agenda encompasses economic relations, trade infrastructure, and potential discussions about transitioning to a common currency, with the aim of reducing member states' dependence on the US dollar.