The US dollar has been the dominant global reserve currency for decades, accounting for more than 60% of the world’s foreign exchange reserves as of 2021. This gives the US a unique advantage in international trade and finance, as well as political influence and leverage. However, the US dollar’s supremacy is not guaranteed, and it faces increasing challenges from other currencies, especially those of the BRICS group of emerging economies: Brazil, Russia, India, China, and South Africa.
The BRICS are among the world’s largest and fastest-growing economies, with a combined nominal GDP of US$28.06 trillion (about 26.6% of the gross world product), a total GDP (PPP) of around US$56.65 trillion (32.5% of global GDP PPP), and an estimated US$4.46 trillion in combined foreign reserves (as of 2018). They also have a significant share of the world’s population, land area, natural resources, and trade volume. The BRICS have increasingly formed into a more cohesive geopolitical bloc since 2009, holding annual summits and coordinating multilateral policies on various issues.
One of the main goals of the BRICS is to challenge the US-led global order and create a more multipolar and equitable world. To this end, they have launched several initiatives to reduce their dependence on the US dollar and increase their use of their own currencies in international transactions. These include:
- The New Development Bank (NDB), a multilateral development bank that provides loans for infrastructure and sustainable development projects in the BRICS and other developing countries. The NDB was established in 2015 with an initial capital of US$50 billion, equally shared by the five members. The NDB operates in local currencies rather than US dollars, and aims to complement rather than compete with existing institutions such as the World Bank and the International Monetary Fund (IMF).
- The Contingent Reserve Arrangement (CRA), a currency swap agreement that provides mutual support for the BRICS members in case of balance of payments difficulties or liquidity pressures. The CRA was also established in 2015 with an initial size of US$100 billion, with China contributing US$41 billion, Brazil, Russia, and India contributing…