The global economy always moves in ever-evolving dynamics, every economic actor, whether countries, groups of countries, multinational private companies or international organizations, has a significant role. One group that is increasingly prominent in the world economic landscape is the BRICS: Brazil, Russia, India, China and South Africa. This group, consisting of countries with rapidly developing economies, has been the subject of great attention in the context of dedollarization, a shift away from the dominant use of the United States dollar in international trade.
BRICS has become quite important in global economic dynamics because of the combination of economic power they have. With its large population, abundant natural resources and rapid economic growth, BRICS has become a motor of world economic growth and plays a role in shaping global policy. One of the important initiatives they undertook was strengthening intra-group trade using their respective national currencies to reduce dependence on the US dollar, known as dedollarization efforts. This illustrates the intention of the BRICS countries to overhaul the international financial structure which is currently dominated by the dollar.
BRICS brings tremendous economic potential. For example, in 2022, the combined GDP of this group will reach about $18.6 trillion, which is close to a quarter of total global GDP. China, as the dominant power in the economic sector of this group, has a significant role in increasing BRICS’ bargaining power in international economic affairs. In the same year, China alone contributed more than 70% of BRICS GDP growth.
Rapid economic growth, large infrastructure investment, strong exports and high domestic consumption have been the main factors driving China’s major contribution to BRICS economic growth. In addition, China as one of the countries with the largest consumer market in the world has a significant impact on the export goals and economic growth of other BRICS countries.
Then on the same hand, Russia is one of the largest energy producers in the world and has abundant natural resource reserves, especially oil and gas. This contribution is important in supporting global energy needs and is a major factor in energy cooperation between BRICS members.
Russia also plays a role in technological and industrial development, especially in the defense, aerospace and nuclear technology sectors. Russia has expertise and potential in these sectors, which can make a major contribution to the development of high technology among the BRICS countries.
In addition, Russia is also involved in strengthening trade cooperation between BRICS countries, including in efforts to reduce dependence on the US dollar in international trade. Russia supports currency diversification in bilateral trade with BRICS countries, which is an important step in supporting dedollarization. In the context of the New Development Bank (NDB), Russia also plays a role in contributing funds to the development bank to support infrastructure projects in BRICS member countries.
Apart from China and Russia, India has also shown steady growth, becoming one of the largest markets in the world with a large population and rapid economic growth. Meanwhile Brazil and Russia, despite experiencing some economic turbulence, still have an important role in the energy and natural resources sector which can influence global market dynamics.
In recent years, through their economic power and influence, the BRICS have collaborated to create alternatives in terms of international trade and finance, which can directly reduce dependence on the US dollar. They have promoted the use of their respective national currencies in trade, reduced dependence on foreign currencies, and strengthened their economic integration.
One of the most significant steps was the establishment of the New Development Bank (NDB) by BRICS in 2014. The NDB aims to provide loans for infrastructure development projects in member countries as well as outside BRICS, using national currencies instead of US dollars. This is a major step in overhauling the international financial structure which has been dominated by institutions such as the IMF and World Bank which use the dollar as the main currency.
According to data from the World Bank, by 2022, intra-BRICS trade will have reached more than $500 billion. Although this figure is still far below global trade, its steady growth shows a tendency to reduce dependence on foreign currencies, especially the US dollar.
Additionally, BRICS efforts to strengthen their financial integration have involved currency swap agreements and the use of alternative payment networks to facilitate bilateral trade in national currencies, reducing the need for transactions in dollars.
Reducing dependence on the US dollar has a significant impact on the global economy. This can reduce the impact of currency exchange rate fluctuations on trade and economic stability. By using national currencies in trade, BRICS can protect themselves from volatility that may arise due to US monetary policy or global market turmoil.
In addition, the move towards dedollarization taken by BRICS could also challenge the hegemony of the US dollar in terms of monetary policy, international trade and world currency reserves. This could lead to reform of a more balanced and fair global financial system, reducing the risks associated with over-reliance on a single currency.
BRICS with its huge economic potential has become an important motor in pushing dedollarization. The steps taken by the group to increase intra-BRICS trade in national currencies are an important step in reducing dependence on the US dollar.
Although a major shift away from dollar dominance may not occur in a short time, the steps taken by BRICS have made a major contribution to overhauling the international financial structure which has been too dependent on the US dollar. In the long term, dedollarization that occurs could be an impetus for a more stable and balanced global financial system.