The Brics Business Forum featuring 1 500 leading businesspeople from member countries of the bloc on Tuesday failed to agree on whether it is time to dump the dollar in favour of a new currency anchored on.
This was said by Standard Bank boss Sim Tshabalala while giving feedback to the Brics Summit convened at the Sandton Convention Centre in Johannesburg.
The Brics Business Forum delegates had met through Tuesday debating the contentious issue of dedollarisation but ended their discussions with a stalemate.
Giving expert opinion on the matter, Tshabalala warned that Brics cannot afford a new currency without proper thought, as such has the potential to backfire.
It is now up to the Brics heads of states to decide the line of march on the subject matter before the conclusion of the summit on Thursday evening.
Said Tshabalala: “The forum discussed the international payment systems in detail. Participants also debated the question of whether a Brics currency is possible or even desirable.
“The strong views expressed were for and against with little consensus being reached.
“Seen from a banker’s perspective, the debate will probably progress more fruitfully if the discourse maintains a sharper distinction between international payments on the one hand and reserve currencies on the other.
“For example, under certain circumstances it may be possible to simplify international trade using a connection of domestic currencies without any reference to any international reserve currency.”
He went on: “It is also important to be realistic about the characteristics of an international reserve currency.
“These include a currency issued by a central bank with very high credibility in the implementation of monetary policy, being a currency of the state or super national entity with an equally strong track record of fiscal policy and meeting its debts, being freely available in large quantities in many jurisdictions and full convertibility at all times.”
Tshabalala believes that these characteristics cannot be achieved overnight without proper groundwork that may take years to complete.
Therefore, in the immediate future, a Brics currency is nothing but a pipedream, as if such new currency ever comes to existence, Brics will also have the headache of convincing other countries to achieve its currency’s wide use to establish credibility in global markets.
The sponsor and champion of the dedollarisation idea, Brazilian President Lula da Silva, said he does not mean countries must abandon their national currencies in favour of a single common currency.
However, he charged, his was a call for the transformation of the payment systems to a fair regime for all countries compared to the status quo that favours the US.
In this way, countries must receive financial assistance and loans in their domestic currencies from international financial institutions such as the World Bank, IMF, New (Brics) Development Bank.
“I have advocated the idea of going to financial integration which will not replace our national currencies,” said Da Silva.
“The financial needs of developing countries remain high for lack of substantial reform from traditional financial institutions and the credit modes offered by these banks [IFM and World bank).
“The decision of establishing the New Development Bank presented a milestone in effective collaboration among emerging economies.
“This joint bank must be a global leader in the financing of projects that address the most pressing challenges of our times by diversifying payment sources in local currencies to promote cooperation between developing countries.”
Da Silva said the insistence on countries using local currencies would be taken to unimaginable heights if the Brics Bank forges close relations with the African Development Bank.
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