The 15th Annual BRICS Summit, which is scheduled to take place in August 2023, will be hosted in South Africa where the leaders of Brazil, China, India and South Africa will mark their presence. Russian Federation will be represented by its Foreign Minister Sergey Lavrov while the Indian President Narendra Modi and Russian President Putin will not attend the summit and are expected to attend it virtually(Kaushik, 2023). Trade, investments, sustainable development, innovation, as well as modifications to the international system of governance are all expected to be on the agenda at the BRICS Summit. The prospective extension of the BRICS alliance along with the emphasis on economic institutional restructuring is likely to have an effect on the economy of the United States.
The summit was also expected to discuss a proposition of BRICS currency; however, it has been dropped from the agenda at the last moment (Cele, 2023). Any such agenda of discussion would have had serious repercussions for the US Dollar in the global financial system. The dollar is without a doubt the world’s reserve currency, accounting for 58% of all foreign exchange reserves and 88% of all international transactions. States across the world have been making efforts to find substitute to the dollar. BRICS states have been working on a variety of projects to lessen their reliance on Dollar. Russia, China, and Brazil have increased their usage of non-dollar currencies in cross-border transactions over the past year while the United Arab Emirates, Saudi Arabia, and Iraq are all actively looking at alternatives to the dollar. Additionally, central banks of states have tried to invest more of their currency reserves in gold rather than the dollar. Hence, the challenge for United States to maintain dollar will likely enhance in the coming years.
Since most of the states have been looking to find an alternative to dollar, conversion of their foreign exchange reserves in to gold instead of looking for an alternate economic model can be a thought-provoking concept. Hegemonic influence of United States will continue to prevail until the dollar will be marketed as the primal currency of the international financial system. In order to minimize that influence while subsequently strengthen the international financial system, states must invest convert their foreign exchange reserves as well as other major monetary investments in to gold. Gold has continually demonstrated the ability to act as a layer of protection against exposure, particularly market uncertainties brought on by outbreaks. It can also be regarded as a hedge against rising inflation because of its scarce supply and long history as an instrument of value. Gold’s valuation is likely to rise amid situations characterized by elevated inflation, offering a potential buffer against decreasing purchasing power. Rise of investments in Gold by all the major powers will not only reduce the power parity of Dollar but will also elevate the purchasing parity of under-developed and developing states; who despite possessing natural resources are unable to equalize and maintain their current deficit accounts and have to seek the assistance of international financial institutions like IMF and World Bank for their survival.
Hence; supposedly, if the BRICS Summit unveils a Gold-backed currency, it will have severe short-term as well as long-term implications for the United States. Dollar will continue to lose its valuation while the stock exchanges will continue to collapse. Furthermore, a panic amongst the people will cause them to sell their dollars in the international market and hence the impact would be disastrous.
Concern over how the BRICS could impact Africa’s trade with the European Union and the United States has been an increasingly worrying subject of concern amongst the Western states. The United States ought to be concerned about the greater cooperation among the members of the BRICS as the alliance has proved substantial and will discuss its expansion(Green, 2023). Since 19 states have expressed their interest in joining BRICS, their prospective joining will likely impact the US hegemonic dominance, passively influence the share of United States in the global services, lessen the impact of the financial institutions such as the World Bank and IMF and further the opportunities for the current and new BRICS members with additional resources and new BRICS members with additional resources and opportunities.