Amidst the current global economic competition, there are talks within the Russia-led political bloc about introducing a new international currency called BRIC. The aim is to decrease the influence of the United States in the global trade market by de-dollarising it.
The question, however, remains: Will Pakistan join the BRICS (Brazil, Russia, India, China, and South Africa) bloc and become part of the new global currency under consideration, or will it opt for other measures to address its financial crisis?
Recent developments indicate that one cannot rule out Pakistan adopting the BRIC. For example, Pakistan has recently placed its first-ever order to purchase Russian crude oil, and the shipment is expected to arrive at a Pakistani port next month.
On the other hand, however, Pakistan is currently facing a severe economic crisis and is making all efforts to revive its International Monetary Fund (IMF) loan program worth $6.5 billion to address the situation.
According to an expert, Pakistan is currently facing a severe balance of payments crisis, with a history of mostly being in deficit. Given the ongoing economic crisis, it is uncertain whether the government can afford to consider joining a new global currency that is still in the planning stages and may lead to further controversy.
“Pakistan will first need to build up its foreign exchange reserves before joining BRICS, as it would require a foreign currency (such as the US dollar) to purchase BRIC for global trade,” he said.
The talk of de-dollarisation is gaining momentum as reported by the global media outlet Foreign Policy. Last month, in New Delhi, Alexander Babakov, Deputy Chairman of Russia’s State Duma, announced that Russia is leading the development of a new currency intended for cross-border trade by the BRICS nations.
Weeks later, in Beijing, Brazil’s President Luiz Inácio Lula da Silva also voiced his opinion, stating, “Every night I ask myself: Why do all countries have to base their trade on the dollar?”
There have been whispers in foreign capitals about a desire to dethrone the US dollar in global trade since the 1960s. However, despite the talk, very little action has been taken. Currently, the dollar is used in 84.3% of cross-border trade, compared to just 4.5% for the Chinese yuan, according to sources.
Nevertheless, based on economic analysis, the prospects for success of a BRICS-issued currency are uncertain, even though there are early plans for it and many practical questions remain unanswered. This currency could potentially challenge the US dollar as the reserve currency of BRICS members. Unlike past competitors such as a digital yuan, this hypothetical currency has the potential to usurp or at least undermine the dollar’s position on the throne. The BRICS group is scheduled to meet in Durban, South Africa, in August for the 15th BRICS Summit.
Published in The Express Tribune, April 26th, 2023.
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