Developing nations are becoming more worried about the dominance of the U.S. dollar in the global financial system and are taking measures to tackle the issue, according to an analyst.
The problem is not the dollar itself but the United States wielding the dollar as a tool of influence, Sant Manukyan, an analyst with Is Yatirim, the investment banking arm of Isbank Group in Istanbul, told Xinhua in a recent interview.
BRICS, a group of emerging economies, is taking action. According to media reports, talks on creating a single currency within the bloc will be among the topics at a summit, which will take place on Aug. 22-24 in South Africa.
“Before the BRICS meeting, we heard that the alliance would launch its currency, an alternative to the U.S. dollar. Such information created a lot of excitement in Türkiye, as was the case in other parts of the world,” Manukyan said.
However, he added that BRICS still has a long way to go for this to happen.
A teller counts banknotes in an exchange office in Ankara, Türkiye, on Nov. 23, 2021. (Photo by Mustafa Kaya/Xinhua)
“We should not forget this: The role of the dollar is not limited to using local currencies when exchanging a product A for B,” the expert said. “The dollar’s significance is also very high in the insurance market. When you rent a tanker, you rent it in dollars. Therefore, the dollar’s dominance will continue for a while when we look at the overall trade.”
Manukyan also highlighted the importance of establishing a common central bank, such as the European Central Bank in the European Union.
“You need to have a common Central Bank like the European Union does and take joint decisions because the interest rate decision and monetary policy required for China or the monetary policy required for Brazil or South Africa are completely different,” he said.
“But, what they are endeavoring to do here is actually trying to develop an alternative payment system. Can this be possible? Of course,” the expert added.
BRICS, a bloc of emerging economies that includes Brazil, Russia, India, China, and South Africa, represents about 40 percent of the world’s population and approximately 25 percent of the global economy.
