BRICS AND THE PATH TO DE-DOLLARIZATION

                                                                 -By Ravishen Jain, Finance Intern, IISPPR

ABSTRACT

BRICS continues its efforts to challenge the dominance of the U.S. dollar in global trade, the group is exploring ways to strengthen financial autonomy and develop a BRICS-specific reserve currency. The development of a reserve currency, together with ongoing efforts to enhance local currency trade, has the potential to reshape global economic systems. By addressing global dependence on the dollar, BRICS aims to empower its member states, foster economic sovereignty, and reduce vulnerabilities in global trade and finance.

CHALLENGES OF DOLLAR DOMINANCE

 The U.S. dollar has long been the dominant global reserve currency, facilitating international trade and investment. As of 2025, nearly 60% of global foreign exchange reserves are held in U.S. dollars, and 85% of global trade transactions are conducted in dollars. However, this dependence on the dollar poses risks for BRICS nations, especially in times of U.S. economic instability or geopolitical tensions.

BRICS has been vocal about the need to diversify from the U.S. dollar, seeking alternative currencies to foster global trade independence. In 2024, the group initiated new bilateral trade agreements where local currencies replaced the dollar in energy transactions between Russia, Brazil, and China. By 2025, over 25% of intra-BRICS trade is estimated to be settled in local currencies, further eroding the dollar’s dominance in the bloc.

These challenges, coupled with geopolitical shifts, have spurred BRICS to accelerate efforts toward de-dollarization, positioning the group as a strong advocate for a multipolar financial order that does not rely on the U.S. dollar.

DEVELOPMENT OF A RESERVE CURRENCY

In an effort to enhance financial sovereignty, BRICS has explored the development of a reserve currency unique to its member nations. As of 2025, discussions about a BRICS currency are intensifying, with the potential to disrupt the current dollar-based system. The establishment of a BRICS currency could help reduce exchange rate risks and mitigate the volatility associated with U.S. dollar fluctuations.

In 2024, BRICS initiated the framework for a reserve currency, which would be backed by the currencies of member states and possibly gold. While not yet operational, this currency would provide a direct alternative to the U.S. dollar and facilitate trade and investment within the bloc. It is projected that within the next five years, BRICS could finalize the currency’s design and begin its gradual introduction into global financial markets.

The establishment of a BRICS currency would mark a historic step in reducing the group’s reliance on the U.S. dollar, strengthening its collective bargaining power in the global economic arena.

ECONOMIC SOVEREIGNTY

For BRICS nations, economic sovereignty is central to reducing external influence on their financial systems. The growing momentum for de-dollarization is a response to the vulnerabilities created by dollar dependency. BRICS is focused on enhancing financial autonomy through local currency trade, alternative financial institutions like the New Development Bank (NDB), and mechanisms like the Contingent Reserve Arrangement (CRA).

In 2024, BRICS member countries advanced discussions on implementing a unified payment system that would facilitate cross-border transactions without relying on the U.S. dollar. By 2025, it is expected that a significant portion of trade within BRICS members will occur using local currencies, including the Chinese yuan, Russian ruble, and Indian rupee. This strategy not only reduces exposure to the dollar but also increases financial resilience within BRICS economies.

These efforts reflect BRICS’ commitment to ensuring that its economic policies and financial decisions are no longer subject to the influence of dollar-centric institutions, thus strengthening the financial autonomy of its member states.

FUTURE PROSPECTS

The shift away from the U.S. dollar holds significant implications for global trade and financial systems. If BRICS succeeds in reducing dollar reliance, it could trigger a broader trend of de-dollarization across other emerging economies, reshaping global economic dynamics. In 2025, it is anticipated that BRICS will further deepen its partnerships with nations outside the group, promoting the use of local currencies and challenging the U.S. dollar’s central role in international trade.

BRICS’ continued push for a reserve currency could lead to a new global financial order that better reflects the interests of emerging economies. The group’s efforts to establish alternative financial networks could undermine the current U.S.-led financial system, providing more equitable access to global financial resources. The potential establishment of a BRICS-backed currency could revolutionize trade, particularly in energy markets, reducing costs and enhancing the financial stability of member countries.

As BRICS continues to strengthen its financial autonomy, the future of global trade may become more multipolar, with increased opportunities for economic collaboration and a reduced reliance on traditional Western financial institutions.

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