After the conclusion of the G7 summit in Tokyo, Japan in 2023— Western power’s reprehension of China’s military activities has led to its strong support for the expansion of BRICS, creating a counterweight to the G7 nations.

The international order is inherently dynamic and continuously evolving in response to the shifting fault lines. The divide between the Global North and South has grown more pronounced and institutionalized, with regional alliances and ad-hocism becoming routine diplomacy.

The origins of BRICS, formerly known as BRIC, can be traced back to economist Jim O’Neill’s 2001 report, ‘Building Better Global Economic Brics’. This grouping held its inaugural summit in Yekaterinburg, Russia, on June 16, 2009, and was later renamed BRICS with the inclusion of South Africa in 2010.

Fast forward almost 13 years to 2023, and the BRICS has undergone remarkable expansion, doubling its membership with the addition of the United Arab Emirates, Saudi Arabia, Egypt, Ethiopia, Iran, and Argentina transforming BRICS into BRICS+ and making it a formidable multilateral grouping of developing and emerging economies. Notably, the last 13 years have been marked by a series of significant international events. The Arab Spring (2010), The Iran Nuclear Deal (2015), Brexit (2016), The COVID-19 pandemic (2019), The Ukraine conflict (2022) and the ever-worsening climate change crisis. The climate crisis, characterized by mismanagement and its intensifying impact, has emerged as a significant global concern, notably adversely affecting underdeveloped and emerging economies that have yet to see the promised financing fulfilled from the developed economies.

After the conclusion of the G7 summit in Tokyo, Japan in 2023— Western power’s reprehension of China’s military activities has led to its strong support for the expansion of BRICS, creating a counterweight to the G7 nations. Moreover, with Russia’s invasion of Ukraine, the BRICS countries have refrained from complying with the G7 and American-led sanctions against Russia, resulting in its ostracization and isolation from global markets, including the SWIFT system, which has made trade increasingly challenging. During the weekend summit, G7 countries escalated sanctions against Russian imports and individuals, further isolating the Russian republic. Russia plays an important role as a major provider of natural gas to developing and European economies.

The narrative in the Global South is pro-growth and sees itself as the future driver of Global development. According to IMF data, the G7’s share of global GDP will fall from 43.5% (2023) to 41.1% (2028), while the 11-member BRICS+ is expected to grow from 29.1% (2023) to 31.4% (2028). Furthermore, the BRICS+ consortium possesses a substantial share of energy resource reserves, including coal, oil, natural gas, and the emerging resource, lithium. This collective ownership of key natural resources particularly following the recent addition of Argentina, Saudi Arabia, and Iran bolsters their energy security and independence. In terms of purchasing power parity, BRICS will account for 37 % of the global GDP and nearly half of the world’s population, after the inclusion of the new members. This contrasts with the G7’s share of 30 % of the global GDP.

Emerging and developing economies depend on three critical factors for growth: Education and skill Development, Rule of Law & stability, and Infrastructure Development. However, due to fiscal restraints, they often resort to borrowing from legacy Bretton Wood’s financial institutions called the multilateral development banks, notably the World Bank and the International Monetary Fund (IMF). While these institutions have historically supported less developed economies, they often attach stringent conditions that can hinder growth, fostering a cycle of dependence on foreign capital and influence; creating client states. Moreover, concerns arise over the perceived Western bias in the Bretton Woods institutions, exemplified by the veto system in the United Nations Security Council and instances of Western powers violating international treaties, such as the Joint Comprehensive Plan of Action (JCPOA) with Iran, raising questions about their impartiality and effectiveness.

The subject of De-dollarization and trade in BRICS currency gained prominence after the freezing of the Russian reserves in 2022 after its invasion of Ukraine with the potential of dollar ‘weaponisation’. However, with the recent crash of the Russian rouble, and the collapse of the Iranian and Venezuelan economies after unilateral US sanctions, there is a persistent fear of the dollar being weaponized as the single currency for international trade. Due to the substantial development needs in emerging economies with high capital flows, there is a growing momentum for the de-dollarization of global trade within BRICS+ nations. The expansion of BRICS, particularly with the inclusion of energy-rich countries, has created new avenues for internal trade, gradually reducing dependence on the US dollar for transactions. One of BRICS’s significant achievements since its inception is the establishment of the Shanghai-based BRICS bank, known as the New Development Bank (NDB).

The NDB is open to membership for United Nations member states and differs from Bretton Woods institutions, featuring equal capital subscription among its founding members and the absence of veto powers for any member. The NDB was founded with a collective commitment of US$100 billion by its 5 founding countries, of which US$10 billion has been contributed for mobilization, and has a high international credit rating. Notably, the NDB has given loans in the local currencies of its member states and actively pursues de-dollarization efforts to strengthen the local currencies of its founding countries. The NDB has successfully mobilized US$30 billion across 80 projects spanning various sectors. Its focus extends beyond its founding members to developing economies, offering a significant opportunity for the institution to invest in a wide array of sustainable projects, particularly in clean energy and infrastructure. Importantly, it provides an avenue for nations in the Global South to access transparent financial assistance for growth without hidden conditions or stipulations.

In conclusion, the evolving international landscape faces profound shifts and challenges. BRICS+, with its expanding membership and growing influence, challenges the dominance of Western institutions. Major global events and institutions like the New Development Bank (NDB) highlight a quest for a fairer financial system for development. Persistent concerns about development finance and dollar monopolization call for international cooperation on delinking the dollar from development. India’s G20 Presidency in July 2023 conducted a vital review of Multilateral Development Banks’ capital adequacy frameworks (CAF), offering recommendations and identifying a significant US$200 billion headroom for the next decade for development finance. This emphasizes the need for transparency and collaboration in the climate crisis, bridging the divide between the Global North and South to address global challenges and foster a more equitable world order.

https://www.financialexpress.com/business/defence-brics-and-beyond-exploring-the-ndbs-post-expansion-impact-on-global-finance-3293880/