In the current changing world, the BRICS group has emerged as a new player in the global political and economic arena. The key players in this group are Brazil, Russia, India, China, and South Africa, and other countries have recently joined this group, including Saudi Arabia, Egypt, Iran, the United Arab Emirates, and Ethiopia.
This variety of countries has increased the strength of this group in terms of politics, economy and geography. These countries, which account for more than 45pc of the world’s population and 26.98pc of the world’s gross domestic product, play an important role in global political and economic developments. In this sense, BRICS is considered as an influential factor in economic and political developments.
The tendency of new countries to join this platform shows their desire to reduce their dependence on the US dollar and western markets. Thus, BRICS seeks to create a common currency to strengthen economic cooperation and facilitate trade between member countries, which can replace the dollar in economic exchanges in the future.
Reducing dependence on the dollar:
The dominance of the US dollar over the world economy began after the end of World War II and the establishment of the Bretton Woods system in 1944, in which the dollar was introduced as the main currency for international trade, but this dominance ended with the abandonment of the gold standard in 1971.
Therefore, one of the main goals of the BRICS countries to create a common currency is to reduce dependence on the US dollar as a global currency and its dominance in international trade. BRICS member countries seek to remain immune from currency fluctuations and US economic sanctions.
The strength of economic cooperation:
The creation of a common currency can help facilitate trade between BRICS countries and prevent additional costs related to currency conversion.
This issue can increase the competitiveness of the goods and services of member countries in domestic and foreign markets and promote regional trade in a faster and cheaper way. Increasing trade between member countries directly contributes to economic growth.
Strengthening the political position:
The BRICS countries seek to strengthen their position in the international arena and reduce the influence of Western powers and challenge the dominance of the dollar. A common currency can help strengthen international cooperation and representation of these countries in the global financial system. Building stronger ties between member states can also help strengthen them on the world stage.
Attracting and facilitating investment:
By creating a common currency and ensuring financial stability, the attraction of foreign investment will be boosted. Foreign investors can easily cooperate in many projects both independently and jointly because challenges related to costs and other currency conversion problems have been resolved, this will help facilitate trade and investment for BRICS members.
An introduction to the prerequisites for creating a new currency for BRICS members
Creating a common currency for BRICS members can help strengthen economic cooperation and reduce dependence on traditional currencies such as the US dollar.
However, certain prerequisites are necessary for this initiative to succeed. These prerequisites include strong economic cooperation among the member countries, political stability, creating a coherent financial system and suitable legal arrangements for the diverse economy of the members.
Providing these above conditions can pave the way for the adoption and effective use of the new currency and help to strengthen the position of BRICS in the global financial system.
Prerequisites:
To create a common currency, the BRICS countries need certain conditions, including providing a suitable platform for strong economic cooperation among the member countries, economic diversity, cohesion to create a financial system, and political stability, which is the most important pillar of this prerequisite. In order for the new currency to be implemented, the member countries must reach full economic convergence. This convergence includes common understanding and agreement on financial, commercial and economic policies.
Political support:
Creating a common currency requires strong political support from the BRICS leaders. Despite the symbolic support for the new currency at the meeting of the BRICS members in Russia, the members of the group must remain steadfast on the political support of this issue, otherwise it can cause difficulties in the process of this joint project.
Challenges: Major differences in size and economic structure
One of the main challenges in creating a BRICS common currency is the economic and financial differences between member countries.
BRICS countries have different economic structures and these differences can lead to conflicts in financial and currency policies.
For example, China and India as larger and faster growing economies in BRICS will have a high capacity to influence common policies, while the economies of Russia, Saudi Arabia and Iran are dependent on natural gas and oil resources.
Brazil and South Africa both have smaller economies and are relatively dependent on certain industries such as agriculture, mining and raw materials.
Ethiopia is a country that has one of the highest economic growth rates in Africa, and agriculture plays an important role in the Ethiopian economy, and this country is recently trying to become a commercial and industrial center in East Africa.
As the second largest economy in the world, China is considered the largest and most industrialized economy and the driving force of BRICS, which undoubtedly plays a dominant role in the economy of this group.
This situation can lead to more dependence of member countries on China and economic differences between members; Because smaller countries may not be able to keep up with the speed of growth and economic complexity of China.
