BRICS’ common currency could be a major problem for the United States because this would permanently increase the country’s borrowing cost, warned Indian-American Vivek Ramaswamy, US Presidential hopeful in 2024. BRICS, an acronym for Brazil, Russia, India, China, and South Africa, is an alliance of major emerging economies.
Ramaswamy, a billionaire entrepreneur-turned-politician, said the BRICS is establishing a currency backed by gold to replace the dollar as the reserve currency of the world. “This is a major problem for the United States. This would permanently increase our borrowing cost if the dollar is no longer the established reserve currency of the world,” he said while responding to a question about the dollar, which is not backed by any commodity, losing its value.
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The 38-year-old US presidential hopeful said that this was happening especially at a time when America was $34 trillion in national debt – “which is not the great time to increase your native borrowing costs”.
“So yes, actually, that does matter. The right way to deal with it, though, is not to try to swat that down, but increase the value proposition of the dollar itself by pegging the dollar to hard commodities,” he said, adding that the single mandate for the Federal Reserve, the central bank of the US, should be dollar stability, stabilise the dollar as a unit of measurement.
Currently, the US dollar serves as the world’s primary reserve currency, and this offers several advantages to Washington such as global trade facilitation, lower borrowing costs, and high demand for its financial assets, among others. But if the dollar is no longer the global reserve currency, its value might decline, affecting the purchasing power of American consumers and businesses, and the competitiveness of US exports.
In the last summit of the BRICS alliance held in Johannesburg, South Africa in August 2023, Brazil’s President Lula da Silva proposed that the BRICS nations create a common currency for trade and investment between each other, as a means of reducing their vulnerability to dollar exchange rate fluctuations.
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Just a month before this, India’s foreign minister Dr S Jaishankar had said that there was no suggestion right now to create a BRICS currency. “Currencies will remain a national issue for a long time to come,” he had said. The common currency also did not find any mention in the Johannesburg II Declaration dated August 23, 2023.
“We stress the importance of encouraging the use of local currencies in international trade and financial transactions between BRICS as well as their trading partners. We also encourage strengthening of correspondent banking networks between the BRICS countries and enabling settlements in the local currencies,” the joint declaration had said.
However, Russian President Vladimir Putin, in a video address to participants of the BRICS Business Forum, said the de-dollarisation process was becoming irreversible across BRICS nations. “A balanced, irreversible process of de-dollarization of our economic ties is gaining steam, with efforts undertaken to develop efficient mechanisms of mutual settlements, as well as monetary and financing control,” he was quoted as saying by Russian news agency TASS.
“As a result, the share of the dollar in export and import transactions within BRICS is declining as it only equaled 28.7 per cent last year,” he said, adding that during the BRICS summit, the leaders of member states would discuss in detail the whole range of issues related to the shift to national currencies in all areas of economic cooperation.
