BRICS announces de-dollarization

RETHABILE MOHONO

MASERU – The BRICS group, consisting of Brazil, Russia, India, China and South Africa, has taken a significant step in its de-dollarization strategy, aiming to reduce reliance on the American (US) Dollar in international trade.

This move seeks to encourage the use of local currencies among member nations and establish alternative financial systems, challenging the long-standing dominance of the dollar.

By shifting away from the dollar, BRICS countries hope to diversify their reserves and shield their economies from fluctuations in the US currency. Economic experts argue that this transition could reshape global trade and financial systems, as countries within the bloc push to create a more balanced economic order.

“The move also aims to create a financial alternative that allows these nations to trade without relying on Western-dominated systems. Strengthening local currencies could stabilize economies and reduce vulnerability to US sanctions while challenging the dollar’s global dominance.”

While the de-dollarization strategy presents numerous opportunities, it also carries potential risks. On the one hand, it increases financial autonomy for BRICS nations, lowers transaction costs, and minimizes dependence on international banking systems that impose high fees.

On the other hand, shifting away from the US dollar comes with challenges such as possible instability in local currencies and geopolitical tensions with the United States, which views the dollar as a strategic economic instrument.

The move toward de-dollarization was a key topic at the BRICS summit in Johannesburg, South Africa, last year. Lesotho’s Prime Minister, Ntsokoane Matekane, was honoured with an invitation to attend, signifying the growing recognition of smaller economies in global discussions.

The summit extensively discussed alternative financial structures and the feasibility of a common BRICS currency.

The idea of a unified currency has been met with both enthusiasm and skepticism. Brazil’s President, Lula da Silva, reignited the debate by advocating for a BRICS currency that would facilitate trade among emerging economies.

“We want BRICS to be a multilateral institution, not an exclusive club,” Lula said during a livestream. “We do not want to be a counterpoint to the G7, G20, or the United States. We just want to organize ourselves.”

His comments highlight the bloc’s intention to create a financial alternative without directly opposing the US-led economic system.

However, the prospect of a common currency remains a topic of intense debate within the group, as many key voices emphasize trade in local currencies and bond issuances instead.

Since its inception, BRICS has grown into a powerful economic coalition. South Africa joined in 2011, representing the African continent and broadening the group’s diversity. Collectively, BRICS countries account for 42 percent of the global population, 33 percent of the world’s GDP, and 17 percent of global commerce.

As a vital pillar of the global economy, BRICS nations continue to contribute significantly to trade, investment, and financial development.

The bloc’s efforts to move away from the dollar come amid an escalating trade war between the United States and China and increasing protectionist policies in developed economies. Analysts suggest that these trends indicate a shift in the global economic order, with developing nations seeking greater control over their financial systems.

Beyond financial matters, BRICS has positioned itself as a platform for international cooperation on issues such as sustainable development, climate change, and global governance reforms.

The bloc actively supports a multipolar world, alternative financial systems outside institutions like the International Monetary Fund (IMF) and World Bank, and comprehensive reforms to the World Trade Organization (WTO).

To achieve these objectives, BRICS has established dialogue platforms to address major regional and global concerns. These include collaborations on finance and central banking, trade, business forums, academic research, health, science and technology, security, agriculture, youth development, disaster management, and counter-terrorism efforts.

The announcement of the de-dollarization strategy marks a turning point for the global financial landscape. If successful, the shift could redefine international trade, reduce the influence of the US dollar, and pave the way for a more balanced economic system.

However, its success depends on how well BRICS nations navigate the risks associated with this transition and whether they can build a robust financial framework that supports economic stability and growth.