A leading BRICS affairs expert said market sentiment would be the final test for a new global reserve currency that BRICS member countries are considering as an “alternative” to the US dollar.
Addressing a meeting of Indian and Russian experts on international relations, former Ambassador of India to Russia DB Venkatesh Verma said on Thursday that national currencies can play a bigger role for trade within BRICS, but expects leadership from them. impractical”. Until “de-dollarization”.
“BRICS is taking a very important initiative in exploring options, as the need for options is very real. But the main issue is how quickly and with what acceptance the options will be put into practice. The dollar has been in effect for a long time. Over a long period of time. But especially since February of this year, there is a growing realization that over-reliance on one currency – the dollar as the global reserve currency – is a factor in increasing risk. But this risk is not addressed overnight. can be done,” said Mr. Verma in his comments.
Mr Verma indicated that the fate of an alternative reserve currency would be subject to market forces that are outside the control of powerful governments. “Whatever mechanism the BRICS countries agree on must ultimately be accepted by the market, as the main test is whether international markets or national markets within the BRICS countries accept this mechanism. There is a significant involvement of governments and central banks. But each central bank will evaluate each of these proposals in terms of whether it helps with risk management and whether markets will eventually accept them.”
The idea of a new reserve currency was presented by President Vladimir Putin during the meeting of the BRICS Business Forum on Wednesday. After launching a “special military operation” against Ukraine on 24 February, a series of Western sanctions were imposed on Russia, intended to impose financial costs on Moscow. This also adversely affected other major economies like India, which have trade ties with Russia but were unable to make payments in dollars. In this context the role of national currencies and an alternative global reserve currency were discussed.
India and Russia are discussing alternative payment systems, including India’s RuPay card and Russia’s MIR card, to address the threat of sanctions that have made energy and commodities trade difficult around the world.
Mr Verma acknowledged the role that national currencies can play within BRICS in helping to facilitate bilateral trade with Russia, and added that India wants BRICS to “reduce conflict and enhance cooperation and trade.” make a positive contribution to
“BRICS has been discussing the role of national currencies for settlements for some time. But national currencies are not meant for de-dollarisation. It is impractical that de-dollarisation can happen overnight. BRICS is a global risk management system. It is an important forum. Individual BRICS countries affect,” Mr. Verma said.