Key facts:
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Hard currency debt is an obstacle for developing countries, Rouseff said.
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Using local currencies reduces risks and facilitates capital flows towards sustainable projects.
The president of the BRICS Development Bank, Dilma Rousseff, has not mentioned the word dollar even once in her recent speeches, but she has been forceful in making it clear that the multilateral entity that brings together Brazil, Russia, India, China and South Africa, must distance itself from the US currency.
It is not something new if you take into account that in recent years Opposition to the US dollar has increased and the BRICS bloc has shown itself in that lineThis is in response to sanctions imposed by the Group of Seven (G7) or the economies of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States after Moscow’s invasion of Ukraine.
As part of this, Russia has been hit by Western sanctions that have used currency as a weapon, forcing it to use alternative means for international payments.
That is why, in a Bitcoin-emerges-as-key-player/” target=”_blank” rel=”noreferrer noopener”>recent statementthe president of the New Development Bank of the BRICS, Dilma Roussef, reaffirmed its focus on getting rid of the US dollar. This, specifically in favor of promoting the local currencies of the alliance countries.
“One of the main focuses of the New Development Bank is to increase the use of local currencies,” said Rousseff at the bank’s ninth annual meeting.
For the president of the Bank, it is necessary to “invest in a sustainable future” and to do so “systemic changes are urgently needed, especially in the international financial architecture.”
Additionally, in Rousseff’s speech, several parts can be identified that They indicate a clear intention to distance themselves from the dollar American and highlight the need to diversify sources of financing.
Rouseff criticized the debt incurred by the world’s major economies and in this regard pointed out that “the mismatch between hard currency debt and income generated by projects creates a barrier to sovereign and non-sovereign investment in developing economies.” With this she denotes that The use of a strong currency like the dollar complicates the financial situation of developing countries.
Rousseff also stressed that “when the United States faces inflation, monetary policy is used to raise interest rates, creating many problems for emerging and developing economies.” She suggested that the United States’ economic policy decisions have negative repercussions for the countries that make up the BRICS alliance, hence the need to prefer mechanisms that avoid dependence on the dollar.
The decisions of the BRICS alliance also impact the dollar
In recent years, the rejection of the US dollar and the policies promoted by the traditional powers (North America, Western Europe and Japan) has marked the agenda of the member countries of the BRICS. They have also leaned towards the creation of their own currency to challenge the dollar and alternative payment systems to SWIFT, the network used by most of the world’s banks.
The call to distance the dollar has apparently had an impact on the US currency. According to the Atlantic Council’s Dollar Dominance Meter, the currency’s share of global reserves stands at just 58% in 2024. That’s a notable decline from 74% in 2002, a year after the BRICS bloc was formed.
Dollar dominance remains strong, but has been declining relative to previous years. Source: Atlantic Council.
Algeria has said it has joined the group, and the number of countries wishing to join the BRICS alliance continues to grow. In fact, Turkey has applied to join the group of emerging economies, as noted by the spokesman of the ruling Justice and Development Party of this country, Omer Celik.
Turkey thus becomes the first NATO member to wish to join the alliance. In 2023, the group has agreed to accept the participation of Egypt, Ethiopia, Saudi Arabia, Iran and the United Arab Emirates.
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