The Economic Implications Surrounding Intergovernmental Organisations: An in Depth Look at BRICS. Writer: Riya Mall. Date Written: 19/12/2024

BRICS is an intergovernmental alliance initially formed by Russia, China, Brazil and India. South Africa joined shortly after in 2010. Many other countries have joined, and 13 countries have been invited to join at the Kazan Summit earlier this year. They all share objectives such as furthering economic development and they want to challenge and reform financial institutions such as the World Bank and International Monetary Fund (IMF). A notable action taken by BRICS is the creation of the New Development Bank in China, lowering their dependence on the Western-led institutions.

There have been talks about creating unified currency which has been in the works but not yet

implemented. The unified currency would cause the reduction in the dollar’s dominance as BRICS

have a purchasing power of 35% of the world’s GDP and 45% of the world’s population. This could lead to a shift away from IMF and the World Bank. Additionally, we see in the EU with their Euro currency, it has created stability with less fluctuations in the currency, easier and cheaper trading amongst countries with more transparency. It has not only affected the stability of their currency, but it is easier for labour and capital to move between countries, boosting economic growth amongst EU countries.

On the other hand, countries within BRICS have varying distances from each other, different political structures and different economies which can be challenging when integrating a unified currency. The shared currency system and if there were not fluctuating exchange rates would strengthen the BRICS countries’ economies. However, some countries will thrive more with the unified currency than others. Russia would be able to have a leeway from the sanctions placed upon them. In the latest summit, there has been a shift from creating a unified currency to reducing use of the dollar and encouraged use of BRICS currencies.

BRICS bloc can have potential to influence oil prices as there have been major oil, natural gas and

renewable energy producers and buyers joining such as Saudia Arabia, Iran and UAE. They can

coordinate and can impose sanctions on other countries. De-dollarisation has been supported and

countries such as India and UAE to trade within their own currencies. Where these oil trading are

usually carried out in dollars, there is hope as more countries, more energy producers join the BRICS that they will trade in their own currencies.

Both EU and BRICS deal with the issue of an ageing population which can affect the available working population and further affect the labour market, but this is particularly felt in the EU. Amongst BRICS countries, there is a varied trends in population growth with China experiencing the aftereffects of their now abandoned one-child policy whilst other countries experiencing population growth. Regarding trade, many of the BRICS countries such as Brazil and Russia are trading partners with countries in the EU and trade agreements are being established with India as well.

With large powerhouses such as China and India with a shared GDP of 18.13 trillion, BRICS has the potential to shift the dynamics from the West through free trade agreements some countries have

amongst each other. There are still issues such as hostility between geopolitical rivals who are part of the BRICS, the different political structures and demographics. Despite differing economies, they all voiced their desire to boost their economies and reduce their dependence on the West.

References:

The BRICS currency conundrum: Weighing the pros and cons of a unified monetary system - Africa

Policy Research Institute (APRI)

The BRICS group: Overview and recent expansion - House of Commons Library

An Evolving BRICS and the Shifting World Order | BCG