BRICS Summit 2024 and Financial Sovereignty Initiatives

The BRICS summit held in Kazan, Russia, on October 23, 2024, was a significant event focused on reducing dependence on the dollar-dominated international financial system. This initiative began with the Fortaleza Summit in 2014, where the BRICS nations started to establish financial institutions for their development and to aid other developing countries.

Key Developments

• New Financial Institutions:
  • The New Development Bank and the Contingent Reserve Arrangement were created, marking a shift towards financial self-reliance for developing nations.
• Currency Cooperation:
  • Initiatives included currency swaps, local currency settlements, and local currency direct investments.
• BRICS Payments Task Force:
  • Established to develop systems for member transactions, emphasizing correspondent banking networks and settlements in local currencies.

BRICS Pay Initiative

The BRICS Cross-Border Payments Initiative, or BRICS Pay, represents a major step towards reducing reliance on the SWIFT network. This system, controlled by G-10 central banks, facilitates international money transfers. BRICS aims to create a new financial network leveraging national systems like Russia's SPFS, China's CIPS, India's UPI, and Brazil's Pix.

• Progress and Challenges:
  • A prototype demonstration of BRICS Pay was unveiled in Moscow in 2024.
  • While Russia is enthusiastic, other nations are cautious, promoting their platforms globally.
• Interoperability:
  • Crucial for creating a cohesive BRICS-led payment infrastructure to compete with SWIFT.

Geopolitical Implications

Amid geopolitical tensions, especially threats from President-elect Donald Trump to impose tariffs, BRICS is motivated to enhance financial sovereignty and reduce exposure to U.S. sanctions. The inclusion of Iran, known for facing sanctions, in 2024 underscores this objective.

Challenges to a BRICS Currency

• Obstacles:
  • Individual countries prefer using their national currencies in trade.
  • Significant macroeconomic coordination is needed, as illustrated by the Euro's evolution.

Biswajit Dhar, a trade economist, highlights both the potential and challenges of these initiatives.