Lowering transaction costs and exchange rate concerns

Developments in BRICS: Growth and Changes in the Economy

On June 10 and 11, 2024, in Nizhny Novgorod, Russia, the BRICS foreign ministers convened to examine two pressing issues: the growth of the BRICS and the creation of innovative payment methods. Discussions this year mirrored a move towards an economic focus, with an emphasis on increasing BRICS members' settlements in national currencies and investigating further ways to grow membership and commerce, particularly among nations in the Global South.

As a possible outcome of the summit, Russia proposed BRICS Bridge, a new payment network that would enable cross-border payments through the use of digital financial assets linked to national currencies. The BRICS countries may become more economically integrated if this plan were to simplify financial transactions and lessen their dependence on Western financial institutions. Nevertheless, the idea is in its early stages of development, and its viability is contingent upon the BRICS nations' engagement and the specifics of the technological aspects.

There is hope that the BRICS Bridge would strengthen economic linkages among the member states and increase their financial autonomy in the face of foreign economic challenges. Additionally, it has the potential to encourage the usage of local currencies, which would lower transaction costs and exchange rate concerns.

On the other side, there are a number of obstacles that might arise, such as the fact that incorporating a new payment system into different economies is technically and legally hard. The readiness of all members to embrace the platform, strong cybersecurity measures, and interoperability are crucial to the success of BRICS Bridge.

Evidence from studies and statistics points to substantial room for expansion in intra-BRICS commerce. One example is the BRICS trade growth of 15% in 2023, according to a research by the Institute of International Finance. This growth was mainly due to the increasing collaboration in the energy and technology sectors. In addition, the BRICS economies were economically significant as they contributed 25% of the world's GDP in 2023.

To make sure the BRICS Bridge and other economic projects succeed, we will propose further steps based on improving technological cooperation: For cross-border transactions to go off without a hitch, the BRICS members need to pool their resources for R&D to solve technological problems and make sure the system is strong.

In a similar vein, increasing people's knowledge of personal finance may help get the word out about the new payment system and its advantages to both businesses and consumers.

A careful strategy to acquiring new core members was shown by the role of BRICS growth. In order for prospective new members to attend important BRICS meetings without actually becoming full members, the idea of a "partnership belt" was put forward. This approach has the potential to steadily include new economies while preserving the unity of the bloc. Among the countries represented during the summit were Turkey and Thailand, both of which have shown interest in becoming members of the BRICS.

Take South Africa as an example; in 2010, it became a member of the BRICS group. As a result of joining the BRICS, its commerce with India and China has increased dramatically. The real advantages of BRICS membership were demonstrated by a South African businessman who, after diversifying his export firm to encompass BRICS countries, had a thirty percent rise in income over a five-year period.

With an eye on economic unity and geopolitical expansion, the BRICS Foreign Ministers meeting in 2024 was a watershed point in the bloc's development. A realistic strategy aimed at strengthening the bloc's economic base is seen in the cautious approach to growth and the proposed BRICS Bridge payment system. Cooperation and shared growth are still BRICS's top priorities as they negotiate these trends.