BRICS Focuses On Cross-Border Payments Over Common Currency

The BRICS nations have decided to take a cautious approach towards de-dollarisation, focusing on developing cross-border payment systems and increasing the use of local currencies in trade and investments.

This decision was made at a meeting of BRICS finance ministers and central bank governors, where they backed interoperable payment systems, local-currency settlements, and voluntary cooperation based on national priorities.

The BRICS Payment Task Force has been tasked with exploring practical solutions for making cross-border payments faster, cheaper, and safer. The grouping also supported greater interoperability between payment and messaging channels and increased settlement of trade and investments using BRICS local currencies.

The New Development Bank (NDB) has been asked to expand local-currency financing, diversify funding sources, and mobilise capital for development projects. Iranian President Masoud Pezeshkian and Russian President Vladimir Putin made a strong case for reducing dollar dependence at the BRICS Business Forum.

They called for wider use of national currencies in intra-BRICS trade alongside mechanisms to manage currency risks. Both Iran and Russia have strong incentives to develop payment channels outside Western-dominated financial systems.

Despite the push, replacing the dollar remains challenging due to its dominance in international trade, commodities, and global finance. BRICS currencies also differ widely in convertibility and international acceptance.

India supports expanding local-currency trade and cross-border payment connectivity. Commerce and Industry Minister Piyush Goyal has called for BRICS members to link their payment systems, highlighting India's Unified Payments Interface (UPI) as a potential model for stronger cross-border financial connectivity.

The BRICS grouping has expanded to include 11 full members, including India, China, Russia, Brazil, South Africa, Saudi Arabia, UAE, Iran, Egypt, Ethiopia, and Indonesia, as well as 10 partner countries.

The decision to focus on cross-border payments and local currencies is a significant step towards de-dollarisation, but it remains to be seen how effective this approach will be in reducing the dominance of the US dollar in international trade and finance.

In the long run, the success of this approach will depend on the ability of BRICS nations to develop robust and efficient payment systems, as well as their ability to increase trade and investments using local currencies.

This development is significant for India, as it has the potential to increase the country's trade and investment ties with other BRICS nations, and reduce its dependence on the US dollar.

The Indian government has been actively promoting the use of local currencies in trade and investments, and the development of cross-border payment systems is a key part of this effort.

Overall, the decision by BRICS nations to focus on cross-border payments and local currencies is a cautious but significant step towards de-dollarisation, and it will be important to monitor the progress of this effort in the coming months and years.