There has been much talk about Pakistan joining the BRICS.
The country is having trouble reviving a $6.5 billion IMF lending package.
KARACHI: Amidst the fierce global economic competition, the Russia-led political bloc is discussing the possibility of launching a new worldwide currency known as BRIC. The goal of de-dollarizing international trade is to reduce the United States’ outsized role in that market.
To what extent Pakistan would join the BRICS (Brazil, Russia, India, China, and South Africa) bloc and use the new global currency under consideration remains an open question.
Given recent events, it seems unlikely that Pakistan will reject the BRIC. For the first time, Pakistan has ordered Russian crude oil, and a shipment is due to arrive at a Pakistani port sometime next month.
Pakistan, on the other hand, is in the midst of a severe economic crisis and is doing everything it can to restore its $6.5 billion International Monetary Fund (IMF) loan programme.
An expert claims that Pakistan is experiencing a severe balance of payments crisis due to the country’s long history of being in deficit. It is unclear whether the government can afford to explore adopting a new global currency, which is still in the planning phases and may lead to additional debate in light of the current economic crisis.
Since it takes a foreign currency (like the US dollar) to buy BRIC for global trade, he argued that Pakistan should increase its foreign exchange reserves before entering BRICS.
According to Foreign Policy, a global publication, discussions of de-dollarization are gaining traction. BRICS nations are working together to create a new currency for international trade, and Russia’s Deputy Chairman of the State Duma, Alexander Babakov, made the announcement last month in New Delhi.
Brazilian President Luiz Inácio Lula da Silva shared this sentiment a few weeks later in Beijing, saying, “Every night I ask myself: Why do all countries have to base their trade on the dollar?”
Attempts to displace the US dollar as the world’s de facto trading currency have been bandied about in foreign capitals since at least the 1960s. But all all the hype, not much has been done. Sources indicate that as of right now, the dollar is used in 84.3% of international transactions, whereas the Chinese yuan is used in only 4.5%.
However, there are early ideas for it and many practical concerns remain unsolved, therefore the success of a BRICS-issued currency is doubtful based on economic research. It is possible that this currency will challenge the US dollar as the BRICS members’ reserve currency. This hypothetical currency, unlike previous rivals like a digital yuan, has the ability to displace or at least threaten the dollar’s position as the preeminent reserve currency. The 15th BRICS Summit will take place in Durban, South Africa in August.
