The New Development Bank (NDB) could play a crucial role in the creation of a common currency for the BRICS group of major emerging economies, according to analyst Tshepo Kgadima. Established in 2014 by Brazil, Russia, India, China, and South Africa, the NDB is a multilateral financial development institution based in Shanghai.
Kgadima believes that making the BRICS bank more powerful would benefit all its members. However, he stresses that before this can happen, the group itself needs to be “institutionalized” and come up with a charter. By transforming BRICS into an organized institution, the talks of a BRICS currency could gain momentum.
The analyst argues that the process of de-dollarization has already begun and will help BRICS countries move towards a single currency. This would enable them to have a direct influence and control over the economic structures of their own nations. However, Kgadima estimates that it would take at least ten years before a BRICS single currency can emerge.
Instead of discussing the idea of a BRICS currency, Kgadima suggests that leaders consider adopting the Chinese renminbi (yuan) as the currency for trade settlements, lending, and investments. He points out that the yuan is already included in the basket of global reserve currencies. Creating a new legal tender from scratch could potentially involve complications with the central banks of BRICS states. Therefore, adopting the renminbi would be more feasible and would also provide a cushion against economic turbulence for BRICS member states.
Kgadima highlights that by using the renminbi within BRICS nations, South Africa, in particular, would be less affected by the volatility of its own currency, the rand, which is heavily influenced by the US dollar. Since the renminbi is already closely tied to the dollar, the adoption of this Chinese currency by the BRICS group would have significant global implications.
However, the economist emphasizes that for the NDB to issue a BRICS currency in the future, it needs to enhance its financial capacity. This move would also help African countries rely less on the West, which has shown a lack of interest in the development and advancement of African economies.
Overall, the NDB has the potential to pave the way for a common currency among BRICS nations. However, the group must first establish a charter and institutionalize itself. Adopting the Chinese renminbi as the currency for trade settlements could be a practical interim solution, given its global reserve status. Nonetheless, the NDB needs to strengthen its financial position to make issuing a BRICS currency possible in the future. Such a move would promote economic independence for African nations, reducing their reliance on the West.