The currencies of the BRICS nations have come into sharp focus⁠

BRICS is a group of five rapidly developing countries: Brazil, Russia, India, China and South Africa. Before South Africa joined, the organisation was called BRIC.

The basic aim of the union is to create a platform for mutually beneficial partnerships and to ensure financial and social stability in each country. At the time of its creation, the countries had similar objectives and challenges: they are developing countries with growing economies.

The main task of creating their own currency within BRICS was to simplify trade, finance projects of the member countries of the union and reduce dependence on the dollar and the euro in international payments.

China and Brazil have already agreed to trade in the Chinese currency renminbi and Brazilian real before the visit of Brazil’s President Luiz Inacio Lula da Silva to China.

In the initial stages of implementation, the new currency could play the role of a unit of account for settlement in national currencies and conversion without the involvement of the dollar. In the long term, it could become a means of settlement and even acquire the status of a reserve currency not only for the BRICS countries, but also for other states.

Reports suggest that the BRICS countries may need to provide an alternative and support a rebalancing of the financial system.

According to the IMF, the renminbi now ranks as the world’s fifth-largest reserve currency, with 2.69 per cent of foreign exchange reserves held in the Chinese currency. The IMF has raised the weighting of the renminbi in the basket of currencies that make up the Special Drawing Rights by 1.36 percentage points to 12.28 per cent, the third-largest weighting.

In December 2022, China established a renminbi clearing centre in Mauritius, the third one after South Africa and Zambia. Using renminbi in China-Africa trade can obviously lower trade risks. Renminbi will become one of the most important currencies in international trade, as reported by African Times.

The currencies of the BRICS nations (which all begin with letter R) – renminbi, real, rouble, rupee and rand – have come into sharp focus. These countries account for more than 40 per cent of the world’s population with 3.2 billion people, the largest pool of human resources. The share of their combined GDP has grown to 31 percent and is expected to reach 50 per cent of the world’s total by 2030. The land area is 40 million square km and is endowed with vast quantities of energy reserves, rich mineral deposits and large tracts of arable land.

African Times has published the article in partnership with ChinAfrica Magazine.

Photo: IStock