South Africa Minister of International Relations and Cooperation, Naledi Pandor, has questioned the feasibility of a single currency for the BRICS nations ahead of a summit to be held in the country.
The issue is likely be on the agenda of a meeting of the nations’ heads of state in Johannesburg on August 22 2023.
“It’s a matter we must discuss and discuss properly,” said Naledi Pandor.
“I don’t think we should always assume the idea will work, because economics is very difficult and you have to have regard to all countries, especially in a situation of low growth when you are emerging from crises.”
The discussion about a common currency for the bloc has been generated by BRICS and other nations questioning why they can’t use their own currencies, instead of the US dollar, to trade, Pandor said.
South African Reserve Bank Governor, Lesetja Kganyago, stated that any progress towards establishing a unified form of legal tender would inevitably lead to further discussions concerning the establishment of a single central bank and its potential location.
“I don’t know how we would talk of a currency issued by a bloc of countries that are in different geographical locations because currencies are national in nature,” he said.
“For the Euro area to arrive at that, they had to establish a treaty where the other countries had to all surrender their currencies.”
In terms of purchasing power parity, the BRICS nations surpassed the Group of Seven (G-7) economies in 2020 and maintained a 4% larger economy compared to the G-7. The International Monetary Fund (IMF) predicts that this gap will continue to expand throughout the current decade despite the G-7 retaining its advantage when measured using market exchange rates.
Nonetheless, the dollar is likely to remain the dominant currency for ‘a long time,’ according to a South African analyst interviewed by Bloomberg.
“No other currency has the recognizability, stability and economic might behind it. The only currency that is vaguely close to being able to replace the dollar is the euro.”
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