Growing number of adherents to BRICS common currency idea may shake dollar's throne

ISTANBUL

Receiving 22 membership applications, the BRICS group of emerging economies is expected to create a new common currency that will be able to challenge the US dollar's global reserve status.

Gathering on Tuesday in Johannesburg, South Africa, the BRICS countries -- Brazil, Russia, India, China and South Africa -- will evaluate the membership applications.

Increasing the number of its members, expanding its overall population and economic power and strengthening alternative institutions such as the New Development Bank (NDB), BRICS aims to topple the US's hegemony over the global economy.

The five-member exclusive platform already accounts for 40% of the world’s population and more than 30% of global GDP, which is forecast to reach 50% by 2030.

BRICS nations account for 18% of global trade and own 22% of the foreign investments on the world scale.

Around 27% of the world’s land surfaces are also owned by these countries.

The Tuesday meeting is expected to announce a new BRICS joint currency.

China, the most powerful economy of the community, stands out as the biggest supporter of the idea of a common currency.

New potential members

Argentina, the UAE, Bahrain, Bangladesh, Belarus, Algeria, Indonesia, Iran, Kazakhstan, Cuba, Egypt, Nigeria, Senegal, Saudi Arabia, Thailand, Tunisia, Uruguay and Venezuela are among the countries that have made formal applications for BRICS.

All member states, China in particular, are welcoming new members to the community; enlargement is one of the main agenda items of the summit in Johannesburg.

Especially Saudi Arabia, the UAE and Egypt come to forefront among membership applications with their strong economies and potential.

Expanding the platform's economy with new members such as oil giants Saudi Arabia and the United Arab Emirates may facilitate the adoption of a new common currency in most of the world.

BRICS, as both the major consumer and producer of energy sources, could also be the determinant body in the energy field.

New Development Bank

The NDB, established by BRICS countries in 2015, and formerly the BRICS Development Bank, stands out as an alternative actor in the global system to the International Monetary Fund (IMF) and the World Bank.

Headquartered in Shanghai, China, it was established with start-up capital of $100 billion and has so far provided $32.4 billion in funding for a total of 98 projects.

It is anticipated that 280 million people will benefit from these projects.

Increasing the number of members to nine in 2021 with the participation of Bangladesh, Egypt, the UAE and Uruguay, the bank is expected to expand with new members such as Saudi Arabia and Algeria in the future.

Potential crisis

The US meanwhile sees the common currency idea as a pipe dream.

Paul O’Neill, a former US Treasury secretary, said recently that the idea of replacing the US dollar is a "kind of madness" and "ridiculous."

Around 90% of international transactions conducted in US dollars, with the dollar also comprising around 60% of global foreign exchange reserves.

Reducing dependence on the dollar not only means an economic shift. Russian reserves worth around $300 billion were held in Western countries due to its war on Ukraine.

Changing the reserve currency is also expected to change the conditions of economic wars and Western countries' dominance in this field.