Ayanangsha Maitra, COGGS
Brazilian Economist Paulo Nogueira Batista, former Vice President of New Development
Bank (NDB) and former Executive Director for Brazil (as well as some other countries) of the International Monetary Fund (IMF), asserts that moving away from the dollar necessitates a feasible alternative reserve currency. “The dollar, euro, and Western payment systems have been grossly misused as political and economic tools. Furthermore, the fiscal and financial vulnerabilities of the US economy raise serious questions about the viability of relying on the dollar as the dominant international reserve currency,” Batista stated during the BRICS Seminar on Governance & Cultural Exchange Forum 2024 in Moscow on September 23, 2024.
Prescribing Ways for Easier Currency Trade
He emphasizes that without an alternative currency, countries will struggle with managing trade surpluses and deficits. Citing Russia’s trade surplus with India, he explained that while Russia accumulates significant rupees from bilateral trade, it may not want to hold them long-term due to concerns over convertibility and stability. He suggested that Russia could:
Invest in India: Use the rupees to invest in Indian businesses or assets.
Increase imports: Purchase more Indian goods and services to alleviate the rupee surplus.
Trade with third countries: Utilize the rupees to engage in trade with nations seeking Indian currency.
“The challenges faced by BRICS nations today are much greater than when the group was established in 2008. The global environment has become significantly more hostile and perilous,” Batista noted.
New Reserve Currency: Reducing Dollar Dependence
He proposed New Reserve Currency (NRC a name for example) aims to function alongside existing national currencies as a parallel digital currency for international transactions. It will be overseen by the New Reserve Monetary Authority (NRMA), which will issue NRCs and new reserve bonds (NRBs) supported by the treasuries of member countries. Initially, an SDR-like unit of account could be established, reflecting the GDP contributions of participating nations.
“The NRC would not have a physical existence in theform of paper money, coins, and demand deposits in
commercial banks. It would be a digital currency, analogous to the CBDCs (central bank digital currencies)
that have been or are being created in a number of countries,” Batista opined.
The Economist further identifies BRICS—Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the UAE—as potential key players in the process of making an alternative of dollar. These nations could create alternative payment systems and engage in trade using their national currencies, thereby reducing reliance on the US dollar.
However, to avoid disillusioning the Global South, BRICS must move beyond mere rhetoric and implement tangible initiatives that showcase their dedication to collaboration and innovation.
“BRICS will disappoint the Global South if they remain focused on slogans and speeches without executing groundbreaking practical initiatives,” he cautioned.
