BRICS Summit 2023: transforming global finance and development landscape
Editor's Note: The writer is a freelance columnist on international affairs based in Karachi, Pakistan. The article reflects the author's opinions and not necessarily the views of Gwadar Pro.
There is no doubt that BRICS is about to enter its new – but very exciting phase – at the Johannesburg Summit. While allocating ample time to the overarching theme of “BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development and Inclusive Multilateralism,” the focus of the 15th BRICS summit is also notably centered around three pivotal topics: the process of admitting new members, the exploration of a BRICS-specific currency, and the implementation of BRICS Pay—a transaction system designed for use among BRICS member nations.
Year by year, speculation grows regarding potential BRICS expansion. The changing global scenario prompts reflection on the potential incorporation of new members, which could potentially redefine the scope and impact of BRICS. While India maintains certain reservations regarding mechanics and technicalities, BRICS expansion garners consensus. Evidently, 40+ countries are in the queue for BRICS membership, underscoring the escalating allure and influence the group commands.
In 2017, China sparked the concept of "BRICS Plus," highlighting the necessity to extend the benefits of BRICS cooperation and establish a broader network of partners, characterized by openness and diversity. South Africa, this year's host, is also markedly invested in this concept. This year, 67 leaders from African nations and the Global South have received invitations for the BRICS-Africa Outreach and BRICS Plus Dialogue. An assembly of about 20 dignitaries from the African Union Commission, the United Nations, and regional economic unions has also been invited for a preliminary meeting preceding the summit.
This unprecedented assembly accentuates the summit into the grandest yet, emblematic of the swelling confidence global leaders vest in this alliance. China consistently welcomes potential additions. Currently, no fewer than 23 countries have officially expressed willingness in joining BRICS. Among them are economically robust entities like Saudi Arabia, as well as nations grappling with economic challenges, including Cuba, Belarus, and Iran.
Three main reasons are pushing more and more countries to seek BRICS membership. One, they aim to escape U.S. dominance in global financial institutions. Consider the International Monetary Fund: it extends loans to developing nations but subjects them to talks about currency depreciation in favor of the dollar and withdrawal of those governments from their economies. Two, another concern arises as developing economies grapple with inflation triggered by the dollar's flight to the U.S. amid mounting interest rates. These nations, often caught off-guard and devoid of international financial or economic support, confront the global impact of US Treasury choices on all central banks worldwide. Third, the imposition of one-sided US sanctions, exemplified by actions against Russia, Iran, Cuba, Venezuela, and Sudan, has triggered concerns among developing nations. Even countries or businesses that try to work with the ones being chastised can also get punished.
We are witnessing a captivating shift, one with the potential to reshape global financial dynamics—the advent of a collective BRICS currency. At the Johannesburg summit, one of the key themes poised for discussion is the creation of this unified BRICS currency. China, a driving force behind this vision, stands at the forefront, determined to challenge the overwhelming dominance of the dollar. Fellow members also vehemently rally behind this endeavor. This currency proposition echoes a call for liberation and signifies a transformative push for a more balanced financial order. Ever since World War II concluded, the US dollar has reigned supreme, holding an 80% share of global transactions and two-thirds of central banks' currency reserves. The dollar's dominance has bolstered US financial prowess and international clout.
Yet, this controversial preeminence also sparks debate. Critics highlight vulnerabilities tied to over-reliance on one currency, advocating diversification. De-dollarization efforts have surged notably due to Western sanctions against Russia over the Ukraine conflict. These sanctions inadvertently have propelled Russia and China to pursue alternative financial avenues. The ensuing momentum signals a renewed push for de-dollarization, challenging the US dollar's longstanding rule on the global stage. Crafting a unified BRICS currency will certainly prove to be intricate due to nuanced political and economic factors.
Ensuring an effective regulatory structure is equally demanding. Establishing trust and global recognition necessitates a gradual, parallel introduction alongside local currencies. Commodity backing, possibly with gold or rare metals like copper, will also be needed. An exchange rate mechanism, smooth payment systems, and a robust financial market are also requisites. The notion of a shared BRICS currency and de-dollarization has many challenges. But this summit holds promise to address these issues, initiating steps towards possible de-dollarization. In 2010, BRICS introduced the Interbank Cooperation Mechanism, enabling cross-border transactions among member banks using local currencies. An upcoming stride in this matter is BRICS pay—a system easing intra-BRICS transactions, bypassing dollar conversion. BRICS Pay could be thoroughly addressed at the summit.
Since its inaugural summit in 2009, BRICS has steadfastly championed multilateralism, revamping global governance, and amplifying developing nations' voices worldwide. The group's commitment to inclusiveness, win-win outcomes, and openness positions it as a promising ally for countries sidelined by Western economic dominance. A groundbreaking aspect of this year's summit is the attendance of all African heads of state. This unprecedented gesture underscores BRICS' role as a constructive power in redefining the global order. BRICS has evolved into a permanent fixture on the global stage. The Johannesburg summit holds the potential for enhancing an equitable and inclusive global development framework, favoring all developing countries.