Why Local Currencies, Digital Payments and New Development Bank Matter
Can
BRICS Build a More Diverse and Resilient Global Financial System?
The
world is going through a phase in which economic stability and geopolitical
stability are becoming increasingly difficult to view separately. Wars, trade
tensions, disruptions in supply chains, sanctions and the growing strategic use
of financial instruments have created new challenges for the global economy. In
such circumstances, the role of BRICS as a multilateral grouping is no longer
limited to economic cooperation. It can also play an important role in making
the global economic system more balanced, diversified and resilient. The
remarks made by Iranian President Masoud Pezeshkian at the BRICS Business Forum
draw attention to this changing global landscape.
Expressing
his gratitude to the Government and people of India for hosting the summit,
Pezeshkian also praised the efforts of Prime Minister Narendra Modi to
strengthen cooperation within BRICS. His observation that the private sector,
companies and entrepreneurs participating in the Business Forum are the ones
who can turn the idea of BRICS cooperation into real economic activity is
particularly significant. It highlights both the challenge and the potential
facing BRICS today. The success of any multilateral organisation cannot be
measured merely by declarations, conferences or policy documents. Its real
value depends on how effectively member countries can translate cooperation
into actual trade, investment, financial partnerships and industrial collaboration.
Pezeshkian
described the current global situation as extremely complex, highlighting
geopolitical uncertainty, disruptions in supply chains and the increasing use
of economic tools to exert political pressure. These are indeed serious
challenges. Over the past few years, the global economy has undergone changes
that have significantly altered traditional economic equations. From
supply-chain disruptions following the pandemic to growing conflicts in
different parts of the world, countries have increasingly realised that
excessive dependence on a single region, country or financial system can become
a major vulnerability during a crisis.
This
is why economic security is no longer limited to production capacity or foreign
exchange reserves. It now encompasses payment systems, supply chains, energy
security, technological capabilities, financial institutions and trade
partnerships. The more options a country or group has in these areas, the
greater its resilience in the face of external pressures. In the context of
BRICS, this becomes particularly important because the economies, markets,
natural resources and production capabilities of its member countries can
potentially complement one another.
The
real strength of BRICS undoubtedly lies in the combined economic potential of
its member countries. But this potential can become meaningful economic power
only when it is connected through strong networks of trade, investment and
joint financing. This is where the difference between potential cooperation and
practical cooperation becomes clear. For years, BRICS members have discussed
increasing intra-group trade, encouraging transactions in local currencies and
strengthening financial cooperation. The need now is to transform these
discussions into practical and institutional mechanisms.
In
this context, the proposal to increase trade in national currencies is
significant. Excessive dependence on a limited number of major currencies in
international trade can create risks for many countries. Exchange-rate
fluctuations, changes in monetary policy or geopolitical tensions can affect
countries that have little or no role in the decision-making processes behind
such developments. Encouraging trade in national currencies among BRICS members
could therefore expand the range of economic options available to them.
However,
the willingness to conduct trade in local currencies alone will not be enough.
A strong financial infrastructure will also be required. Effective systems will
have to be developed for currency conversion, payment settlement, currency-risk
management and the security of cross-border transactions. If payment mechanisms
remain complicated, expensive or slow, companies will naturally continue to
prefer established international systems. The real challenge before BRICS,
therefore, is not merely to announce an alternative payment system but to make
it convenient, reliable and competitive enough for the business community to
adopt it voluntarily.
This
also makes the discussion around digital payments and digital currencies
increasingly important. Technological advances have opened new possibilities
for transforming international payments. Central bank digital currencies and
modern digital payment systems could help make cross-border transactions faster
and more transparent. If BRICS countries can establish greater interoperability
among their respective digital payment infrastructures, it could reduce both
the cost and time involved in international trade.
However,
presenting digital currencies as a direct replacement for the dollar would
oversimplify the reality. The international role of a currency is not
determined by technology alone. It also depends on the size of its market, the
credibility of its financial institutions, the freedom of capital movement,
economic stability and international acceptance of the currency. Therefore, the
objective of BRICS should not simply be to replace one currency with another. A
more practical approach would be to create additional options for international
trade and payments.
The
same principle applies to the New Development Bank. Pezeshkian has stressed the
need to make it a major instrument for financing infrastructure and energy
projects in BRICS countries. If trade among BRICS members is to increase,
investment flows must grow alongside it. Trade in goods and services alone will
not be sufficient. Long-term investment will be required in energy,
transportation, digital infrastructure, manufacturing, logistics and emerging
technologies.
Local-currency
financing could be an important option in this regard. If projects in member
countries can access loans in their respective domestic currencies,
foreign-exchange risks could be reduced. There is also a need to develop
dedicated credit lines and guarantee mechanisms to encourage private capital to
participate in such projects. Governments and multilateral financial
institutions can play an important role in reducing risks. This could open new
markets for the private sector while multiplying the impact of public
investment.
BRICS
faces perhaps its biggest challenge in converting government-level cooperation
into active private-sector participation. Businesses are the actual users of
any economic system. For them, the ease of payments, cost of financing,
regulatory clarity, market access and investment protection are the most
important considerations. If these areas improve, economic integration within
BRICS will no longer remain merely a government-led initiative; it could evolve
into a process increasingly driven by commercial interests.
India's
role in this process is particularly important. Apart from being a major
consumer market, India has a rapidly growing digital economy, a strong services
sector and expanding manufacturing capabilities. India's experience with
digital public infrastructure and fast payment systems could provide a useful
foundation for cooperation with other BRICS members. At the same time, stronger
payment and financial connectivity within BRICS could open new markets and
investment opportunities for India.
However,
BRICS also faces significant internal challenges. Its member countries have
different economic structures, political priorities, monetary systems and trade
interests. Building a common financial or monetary framework will therefore not
be easy. A phased approach would be more practical. The process could begin
with greater use of local currencies in bilateral and multilateral trade. This
could then be followed by greater interoperability between payment systems,
currency-swap mechanisms, financial guarantees and, eventually, broader digital
payment networks.
Most
importantly, BRICS should be viewed not as a grouping that seeks to stand
against any existing system, but as a platform for building a more diverse and
balanced global economic order. Dividing the global economy into competing
blocs is in nobody's interest. At the same time, excessive dependence on a
single financial system or a limited set of options can increase economic
risks. Creating additional alternatives can therefore be a positive step
towards greater global economic stability.
Pezeshkian's
remarks point towards the need for this broader transformation. Amid
geopolitical tensions and economic pressures, BRICS faces both an opportunity
and a challenge. The opportunity lies in connecting the group's vast markets,
resources, capital and technological capabilities to create new sources of
economic strength. The challenge is to move beyond political declarations and
translate this potential into practical institutional frameworks.
Ultimately,
the success of BRICS will depend on how effectively it simplifies trade among
its members, facilitates investment and creates effective mechanisms for
reducing financial risks. Greater use of national currencies, stronger digital
payment systems, an expanded role for the New Development Bank and greater
participation from private capital could all become important steps in this
direction.
Instead
of focusing solely on the debate over replacing the dollar, BRICS could focus
on creating a more diversified economic system in which countries have multiple
reliable options for trade and payments. If it succeeds in doing so, the impact
could extend far beyond its member countries. It could contribute to a global
economic system in which trade and investment decisions are driven more by
economic viability and less by geopolitical pressure.
The
need today is not to eliminate any single currency, but to reduce the risks
associated with excessive economic dependence. The objective should not be to
challenge one financial system, but to create safer, more transparent and
diversified alternatives. If BRICS moves forward with this approach, it could
strengthen its position not merely as a grouping of emerging economies but as
an important institutional force in the changing global economic order.
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