Facts for Prelims (FFP)
Source: LM
Context: BRICS (Brazil, Russia, India, China and South Africa) are reportedly working on their own currency – established on a strategy that ‘does not defend the dollar or euro’.
What is de-dollarization?
De-dollarization refers to the process of reducing the use of the US dollar in international trade and finance. This may involve countries diversifying their foreign currency reserves by holding fewer US dollars and more of other currencies.
Need for de-dollarization: US dollar became the official reserve currency of the world in 1944 (by the Bretton Woods Agreement). However, several countries have alleged that the US has been misusing dollar dominance by the imposition of sanctions as a tool to achieve foreign policy goals.
Recent steps by India for De-dollarization: Trade in Indian Rupee (agreement has been signed with 18 countries, including UK, Germany, Russia and the United Arab Emirates); Currency Swap agreement.
About BRICS:
| Description | |
| Name | In 2001, the British Economist Jim O’Neill coined the term BRIC to describe the four emerging economies of Brazil, Russia, India, and China. |
| Origin | Formalized during the first meeting of BRIC Foreign Ministers in 2006. South Africa was invited to join BRIC in December 2010; HQ of BRICS: Shanghai |
| Significance | The BRICS brings together five of the largest developing countries in the world, representing 41% of the global population, 24% of the global GDP, and 16% of the global trade. |
| Chairmanship | The chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S. South Africa is the 2023 chair of the BRICS. Each country has one vote. |
| Initiatives of the BRICS | New Development Bank (by the Fortaleza (Brazil) declaration in 2014); Contingent Reserve Arrangement; BRICS Payment System (as an alternative to the SWIFT payment system); Customs Agreements; Launched of BRICS Remote Sensing Satellite |
