Local currency settlement among BRICS member countries is seen as a threat to the US’s economic dominance by its President Donald Trump. However, international financial markets & global trade will continue to be dominated by the US dollar, explain Pralok Gupta and Shagufta Naaz
l How BRICS has changed over time
BRICS WAS FORMED with the broad aim of deepening cooperation among emerging economies to ensure more equitable, sustainable and mutually beneficial development. It announced a major expansion in 2023, following which six new members — Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and UAE — were admitted. It now represents 45% of global population, 37% of world GDP, and 25% of global trade. This expansion reflects a clear shift in BRICS’ ambitions, from a coalition of emerging economies to a more globally influential political and economic bloc.
The inclusion of major energy exporters like Saudi Arabia and the UAE, along with key African economies such as Ethiopia and Egypt, signals BRICS’ intent to gain more leverage in global governance, energy markets, and multilateral diplomacy. While cooperation on economic issues remains central, the bloc is now being shaped by rising multipolarity, the US-China rivalry, and the desire of countries like Russia and China to counter Western influence. BRICS has expanded its agenda to include alternative financial infrastructure, energy security, and global
south leadership.
l Why the bloc adopted the local currency settlement process
LOCAL CURRENCY SETTLEMENT is the settlement of export and import bills in the local currencies of the trading partners instead of internationally recognised currencies, such as the US dollar. BRICS member countries launched multiple initiatives aimed at increasing local currency settlement in cross-border trade. The aim is to cut transaction costs, manage currency risks and build economic resilience in the face of sanctions or dollar liquidity shocks. The initiatives are part of a broader strategy to build an alternative financial infrastructure to reduce dependence on the US dollar. The New Development Bank set up by BRICS promotes lending in local currencies. BRICS has also proposed the BRICS Pay system, a fintech-powered platform to enable direct digital payments among members.
l BRICS’s attempt at de-dollarisation
DE-DOLLARISATION REFERS to reducing the use of US dollar in international trade, reserves, and financial systems. Russia and China are the two major countries taking the lead in de-dollarisation efforts of BRICS. In 2024, China-Russia trade reached $244.8 billion, a significant portion of which was settled in Chinese yuan and Russian rouble. India and Brazil also have undertaken similar but more limited local currency settlement efforts. BRICS members also pursued local currency bond funds, alternative payment systems, and even explored the idea of a BRICS digital currency (BRICS Coin) as a step toward digital de-dollarisation. Though progress has been slow so far, the long-term vision is to establish a non-dollar global financial network that could be attractive to other emerging economies. There are also efforts, led by Brazil, to introduce a common BRICS currency.
l Why US opposes the grouping
THE US HAS a lopsided trade relationship with BRICS with the trade balance strongly tilted in favour of the latter. In 2023, the US exported $300 billion worth of goods to BRICS but imported around $650 billion from BRICS. This created a large trade gap, especially with China, which alone sent goods worth $448 billion to the US.
US President Donald Trump considers BRICS a threat to the US’s economic dominance. The international financial system today is dominated by the US dollar, with it accounting for almost 90% of currency trading. The BRICS grouping’s efforts to have its own common currency and using local currency settlements (de-dollarisation) could weaken dollar in global markets. This directly contradicts Trump’s America-first policies that are intended to increase the value of the dollar. Therefore, Trump considers the BRICS bloc not only affecting US hegemony but also weakening his country’s economic influence through de-dollarisation. Very recently, Trump threatened extra 10% tariff on countries that side with BRICS.
l Can the dollar be really replaced?
WHILE RUSSIA AND China are pushing for de-dollarisation, other countries like India are more cautious. Considering the geo-political relations within the BRICS member countries, a common currency for BRICS may not fructify soon.
Further, as most of the BRICS currencies are not widely accepted in global trade, local currency settlement by BRICS also has its own limitations.
Therefore, the global trade and international financial markets will continue to be dominated by the US dollar though de-dollarisation efforts by BRICS may result in some dent on the dollar.
Gupta is a professor and Naaz is a consultant at the Centre for WTO Studies, IIFT, New Delhi
