Daniil Katkov, an expert from the Institute for Energy and Finance, commented to Gazeta.Ru on the prospects for creating a new international currency of the BRICS countries.
The BRICS countries - Brazil, Russia, India, China and the Republic of South Africa - are working on the creation of a new international currency. It will be based on the basket of currencies of the BRICS countries, Russian President Vladimir Putin said at the group's business forum. That is, the Brazilian real, the Russian ruble, the Indian rupee, the Chinese yuan and the South African rand.
According to Daniil Katkov, the creation of a new currency based on the currency baskets of the BRICS countries is inappropriate.
According to the expert, there may be distrust in the international currency based on baskets of the countries.
“It's hard to implement. It is more rational to use the yuan. It has the smallest discrepancy against the dollar of all currencies. It is more resistant to fluctuations due to the actions of the Central Bank of China. Therefore, most likely, the choice will fall on the yuan, and not the currencies of other BRICS countries, which are subject to devaluation. It is not a fact that other countries will agree to use the same Brazilian real or Russian ruble,” Katkov said.
How fast can a new currency be created
“In order to have trust, it is necessary that all countries recognize the new international currency – both the BRICS countries and other countries, and started working with it. It will be quite difficult to do in the current conditions. There will definitely be confidence in the yuan. Saudi Arabia said in mid-March that it was ready to switch to be paid by yuan from China for oil supplies. The Russian Central Bank also uses the yuan as a reserve currency, just like the dollar and the euro before,” Katkov explained.
According to Katkov, the use of the yuan as a currency for settlements by BRICS participants is a faster way than creating a new one based on the baskets of currencies of the group's countries. With the political will of the group members, the transition to a reserve unit based on the yuan can take from several months to six ones.