The BRICS alliance proposes a new cross-border payment system called BRICS Pay to reduce global dependence on the US dollar and promote local currencies. The system, envisioned as an alternative to the West-dominated SWIFT network, aims to facilitate trade within the bloc and provide insulation against Western sanctions. However, the initiative faces significant execution challenges due to the economic disparities and differing priorities among its 11 member nations.
The BRICS alliance is seeking a new path in global finance with the launch of a BRICS Pay system. The proposed cross-border mechanism aims to reduce US dollar dependency and promote the local currencies of member nations.
The alliance envisioned BRICS Pay to be a standalone payment mechanism, similar to the West-dominated SWIFT system. Its goal is to facilitate trade in local currencies and insulate against tariffs and sanctions from the US and the West.
However, the execution could face significant hurdles due to the bloc’s diverse structure. For a payment mechanism to work, the trading volume has to be massive, and China accounts for a disproportionate share of exports within the group.
This disparity could allow China to control the system’s functioning due to its larger share of payments. The wide gap in trade volume between China and other members presents a fundamental structural challenge.
A core issue is the “currency trust problem” where the US dollar remains the most trusted currency globally. Other countries might not accept BRICS Pay as it does not uplift their native economies, unlike the dollar which provides stability and instant liquidity.
Economic priorities also differ sharply among members, which chips away at the unified ideology. While Russia and Iran seek change due to sanctions, India wants Western support to boost its GDP, and other nations remain confused about their objectives.
