BRICS nations talk on reserve currency to reduce dependence on dollar, euro

The BRICS countries are working to bring in a new reserve currency to better serve their economic interests, according to senior Russian diplomat and points person for the bloc Pavel Knyazev.

The reserve currency will be based on a basket of the currencies of the five major emerging economies of Brazil, Russia, India, China and South Africa, according to media reports.

"The possibility and prospects of setting up a common single currency based on a basket of currencies of the BRICS countries is being discussed," Knyazev, Russian Sous Sherpa said.

Analysts say that the BRICS reserve currency is meant to rival and reduce reliance on the US dollar, euro and the IMF's Special Drawing Rights (SDRs) currency.

All BRICS members have taken steps to de-dollarise and improve their autonomy in the global financial system.

Also read: Can BRICS reserve currency diminish dollar dominance?

During the 14th BRICS Summit in June, Russian President Vladimir Putin announced that the five-nation bloc plans to issue a new global reserve currency. "We are ready to openly work with all fair partners," he said.

Putin’s announcement had underscored the importance of recognising the heterogeneous motives of the BRICS nations to not only facilitate intra-BRICS trade in local currencies, but also firewall their global financial interests.

According to Knyazev, member countries are "actively studying mechanisms" to exchange financial information to develop a reliable alternative for international payments.