BRICS Drops Common Currency Push, Focuses on Cross-Border Payments

With the 11-nation Brics grouping pledging to boost cross-border payment links but making no move towards establishing a common currency, analysts said the vow marked a shift towards a more pragmatic de-dollarisation strategy rather than a retreat from the effort.

A 45-page leaders’ declaration issued on Saturday at the Brics summit in New Delhi said the group’s Payment Task Force would continue working to facilitate “fast, low-cost, more accessible, efficient, transparent and safe” cross-border payments among Brics countries.

However, Sudhakar Dalela, secretary of India’s Ministry of External Affairs, told a news briefing on Saturday there was “no proposal in the Brics for a Brics currency, as of now”. Matteo Giovannini, a non-resident associate fellow at the Beijing-based Centre for China and Globalisation, said it was “less a retreat from de-dollarisation than a shift in its strategy, from trying to create a common Brics currency towards building the infrastructure that allows Brics members to reduce their reliance on the dollar in practical terms”.

“This is a much more achievable objective,” he said, citing hurdles including differences in monetary policies, exchange-rate regimes, capital controls and economic structures across Brics members as reasons for the declaration’s more “pragmatic approach.” The declaration said the task force had also studied “cross-border interoperability of payment and messaging channels” and had held talks on using local currencies for “trade settlements and investments”.

The idea of a Brics currency has drawn widespread attention since Brazilian President Luiz Inacio Lula da Silva floated the prospect of a common trading currency in 2023. That later prompted US President Donald Trump to threaten 100 per cent tariffs on Brics countries if they moved to create a new currency or replace the US dollar.

Xu Tianchen, senior economist at the Economist Intelligence Unit, said the vision of a common Brics currency “lacks the business case”.

He cited the absence of a single market among the 11 members of the group, the lack of a central body that could have a say in members’ policymaking – along the lines of the European Commission – and members’ differing ambitions to retain control.

“These mean a collective political union, a single market and a unified currency will all be very difficult,” Xu said.

The 11 Brics members are: Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, the United Arab Emirates, Saudi Arabia and Indonesia.

However, analysts said efforts to reduce reliance on the US dollar were likely to continue amid mounting geopolitical tensions and concerns over the dollar-dominated financial system, although they would follow a more practical and incremental path.

“Each country has the incentive to bypass the dollar system,” Xu said. “So one possible way is for each country to build its local currency settlement networks and ensure interoperability within the various systems.” Giovannini forecast a future with greater use of national currencies for intra-Brics trade, more interoperable payment and messaging systems, and potentially deeper cooperation around settlement and financial infrastructure.

“I would expect Brics to make more progress on the plumbing of international finance than on creating a new currency,” he said.