The 15th BRICS summit is taking place in Johannesburg, and the alliance is looking into ways to end reliance on the U.S. dollar. Promoting native currencies for trade is on the top agenda at the summit as the members aim to strengthen their native economies. Russia’s President Vladimir Putin said that BRICS is developing effective mechanisms for global trade settlements and currency exchanges to gain financial control. The payment mechanism will revolve around local currencies and sideline the U.S. dollar for cross-border transactions.
Also Read: BRICS: Expansion Top Agenda of the Summit
The new payment mechanism being developed by BRICS will provide seamless services to businessmen, multinational corporations, and entrepreneurs, as Putin mentioned. The mechanism, which will not include the U.S. dollar, is currently under development.
Once BRICS seems comfortable settling payments in local currencies, there are slim chances of returning to the old way of doing business. BRICS controls 20% of global exports, and ending dependency on the U.S. dollar for payments could hurt the greenback. Their population also reaches 3 billion, making businesses capture a larger section of people and boosting their native economies.
New Mechanism Will Boost Economies of BRICS Members
Business enterprises in BRICS countries could do away with the U.S. dollar and remit payments in local currencies. The move will significantly bolster the prospects of their respective currencies and eventually compete with the U.S. dollar. The process could begin slowly but gain steam down the road after a few years.
In conclusion, the U.S. economy could take a hit if the development plays out and could affect various financial sectors. Read here to know how many sectors in the U.S. could be impacted if BRICS stops paying in dollars. BRICS is an acronym for Brazil, Russia, India, China, and South Africa.