According to Alexander Babakov, deputy chairman of the Russian parliament, the State Duma, the BRICS alliance is looking into the creation of a cutting-edge currency and intends to present ideas for its establishment at the upcoming summit in South Africa.
Babakov stated that the plan is to first transition to using domestic currencies in transactions and then introduce and circulate a digital or alternative form of a revolutionary currency in the near future. Babakov was speaking at the St. Petersburg International Economic Forum event in New Delhi, India.
According to the news agency Sputnik, Babakov believes that the BRICS leaders’ summit will demonstrate a readiness to carry out this specific plan.
Why is the BRICS alliance planning to have a new currency?
Brazil, Russia, India, China, and South Africa, collectively known as BRICS, are five of the top emerging economies in the world. Recently, the Federal Reserve has aggressively raised interest rates, which has placed pressure on other nations’ currencies. The BRICS countries further see this as an ideal opportunity to take advantage of the rising level of hostility towards the U.S. as evidenced by the strength of the Russian currency in the wake of harsh sanctions imposed by the U.S. and other European countries.
What are the challenges this can face?
The issue is that the word “Brics” is not particularly relevant to the economy. Three basically stagnant commodity exporters are combined with a potential economic superpower in India and a superpower in China. The economies are noticeably dissimilar in terms of commerce, growth, and financial openness, and are therefore a long way from being even an optimal currency region. While Brazil and South Africa struggled to prosper without robust commodity prices supporting low interest rates and rising domestic credit, Russia’s economy was obviously the weakest of the five Brics last year.
The contrast in acts is striking. Between 2008 and 2021, China’s and India’s real GDP per individual increased by 138% and 85%, respectively, at constant prices. For Russia, it is 13%, and for Brazil, it is 4%.
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