Unified currency for BRICS mooted

There has been an ongoing debate among experts and leaders across the globe on whether the BRICS countries should develop a unified currency to facilitate trade among the member states.

This is despite the announcement last month that a unified currency for BRICS will not be on the agenda of the BRICS summit in South Africa.

Patrick Bond, a professor at the University of Johannesburg Department of Sociology, expressed disappointment with the announcement, saying the world is desperate for an alternative to the dollar.

"The ridiculous reliance that we have on the dollar has to end and it's tragic that BRICS is not going to be in a position where political will is sufficient to fight US dollar hegemony," he said.

The US dollar has been dominating since the collapse of the Bretton Woods System in 1971.

Li Xiuzhu, head of Global Markets China at the Standard Bank Group, Africa's biggest lender by assets, said having a unified currency within BRICS is a bold move and a risky agenda.

He said a single currency within a region needs a lot of work, including considering the economic impact it could have on all the economies.

Li said the eurozone is a good example for BRICS to consider.

When the eurozone was established in 1999, he said it had many goals of ensuring stability within the region. For this reason, it created a common monetary area.

However, the financial crisis of 2008 proved that one failed economy — in this case, Greece — could put an entire region's financial stability at risk.

Philani Mthembu, executive director of the Institute for Global Dialogue associated with the University of South Africa, said having a joint currency for BRICS is a long-term objective.

He also said the countries should open up spaces for trading and exchanging in local currencies.

David Monyae, director of the Centre for Africa-China Studies at the University of Johannesburg Confucius Institute, said in addition to increasing trade among themselves in local currencies, BRICS countries should also consider having a digital currency.

'Easy, efficient'

"If they can speed up the process, it will be more easy, efficient and we will have a positive impact on global trade and the economic strength of these countries," Monyae said.

Against the backdrop of the complexity surrounding the establishment of a unified currency for BRICS, Li said the yuan could be a choice for an alternative currency.

He said many of the BRICS countries are already adopting the yuan as a currency of trade and including it in their reserves.

South Africa, for instance, has a swap agreement with China even though it's yet to draw down on the swap line.

Russia was using the yuan in trading with China.

"As the yuan becomes more accepted in global trade scenarios, an alternative system to the Western financial order may evolve," he said.

Li said the Cross-Border Interbank Payment System, or CIPS, China's answer to the Society for Worldwide Interbank Financial Telecommunications, or SWIFT, is currently in development.

"Many Chinese state-owned enterprises and strategically important corporates, in fear of being shut out from global settlement if excluded from SWIFT, are partaking in the new cross-border payment system," he said.

Li is of the view that increasing the usage of each other's currency and having a direct exchange bypassing the dollar could be a more realistic, closer and low-hanging fruit for BRICS nations to consider.

He noted that the yuan may not challenge the dollar's status as the preferred currency of global trade in the immediate future.

"There are many hurdles for the yuan to overcome in order to become a globally accepted currency. The best comparison should be the Japanese yen. Now, the yen has a better overall weighting in the basket than the yuan," he said.

"The goal of yuan internalization ought not to be replacing the dollar, but to support and protect the trade networks between China and African economies," Li said.