Key Takeaways
- The New Development Bank of BRICS will offer loans in the local currencies of member states.
- The loan in local currency will cover up to 30% of the total loan amount
- The move comes as yet another step towards the de-dollarization of the global economy
YEREVAN (CoinChapter.com) — Another major financial institution is ditching the US Dollar in what comes as yet another major blow to Washington. According to recent reports, the New Development Bank (NDB) of BRICS nations will offer loans in the local currencies of member states.
As confirmed by Dilma Rousseff, the new chief of NDB, the move is a step toward de-dollarization. As a result, as much as 30% or one-third of the total loan amount will not be in the greenback.
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The move is not surprising. The United States has constantly used the Dollar to enforce its influence on countries. However, the recent sanctions imposed on Russia, owing to its invasion of Ukraine, have alarmed the developing world.
In the past, Washington has also sanctioned countries like Iran, North Korea, Syria, Cuba, Venezuela, Belarus, etc. The dependency on the Dollar and dollar-based payment systems, such as SWIFT, makes countries vulnerable. Hence, to counter it, the world is looking for ways to break away from dollar dominance.
Recently, BRICS also announced it is working to form its internal currency for trade. The organization comprises economic giants Brazil, Russia, India, China, and South Africa.
BRICS reduces reliance on the US Dollar
The Shangai-based New Development Bank (NDB) is the Global South’s answer to the US-dominated World Bank. Established in 2014 by the five members of the organization, it aims to break free from the neoliberal economic policies of the West, which have negatively impacted the economies of developing nations.
The bank’s new head, Dilma Rousseff, is a long-time leftist politician who served as the President of Brazil between 2011-2016. She took over the reins of the bank in March 2023.
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“It is necessary to find ways to avoid foreign exchange risk and other issues such as being dependent on a single currency, such as the U.S. dollar. The good news is that we are seeing many countries choosing to trade using their own currencies,”
she told the Chinese media outlet CGTN earlier.
Earlier this month, the incumbent President of Brazil, Lula da Silva, her colleague from the Workers Party, also took a jibe at Washington. During his official visit to Beijing, da Silva advocated ending the US Dollar’s global dominance. Moreover, he called for a new currency “to finance trade between Brazil and China, between Brazil and other BRICS countries.”
An alternative to the US Dollar
Calls for an alternative currency to counter the US Dollar have intensified among the BRICS nations.
In January 2023, South African International Relations Minister Naledi Pandor revealed that the BRICS group would develop a fairer monetary exchange system to weaken the greenback’s dominance.
Attacking the existing monetary system as one that favors wealthy countries, she called for an alternative to the dollar-dominated financial system.
“We have always been concerned by the fact that there is a dominance of the dollar and that we do need to look at alternative. The systems currently in place tend to privilege very wealthy countries and tend to be really a challenge for countries, such as ourselves, which have to make payments in dollars which costs much more in terms of our various currencies,”
she said.
The development comes as a huge blow to the United States. Member countries of the New Development Bank include the founders of the BRICS, Bangladesh, the UAE, and Egypt.
While Uruguay is joining, many other countries, including Argentina, Iran, and Algeria, have also applied for membership. Moreover, several nations have expressed a desire to join the economic block. These include Saudi Arabia, Egypt, UAE, Turkey, Indonesia, Mexico, and several African nations.
Last month, Saudi Arabia snubbed the Biden Administration and joined the China-led Shanghai Cooperation Organization (SCO).
According to Biden Administration’s Treasury Secretary Janet Yellen, economic sanctions on Russia also hurt the US Dollar. Former US President Donald Trump had also warned earlier this month that the US dollar’s dominance as reserve currency stands threatened under President Joe Biden.
