Amid global economic tensions and international currency volatility, the BRICS New Development Bank (NDB) is enhancing its support for « Global South » countries. To achieve this, the geopolitical group is focusing on local currency financing—a strategic choice aimed at reducing the reliance of Global South nations on the U.S. dollar.
Goals for sustainable local currency financing
The BRICS NDB aims to increase the share of loans issued in local currencies to 30 % by 2026, up from the current 22 %. By refocusing its financial activities around national currencies, the development bank seeks to provide borrowing countries with greater flexibility.
This initiative will help reduce exposure to exchange rate fluctuations, offering more stability throughout repayment. This mechanism is expected to help developing economies better structure their finances and limit borrowing costs by mitigating the effects of currency fluctuations.
NDB President Dilma Rousseff highlights the importance of this initiative, noting that current financing levels fall short of the needs of the Global South. « The bank has already committed significant amounts to various projects, but more efforts are necessary », Rousseff states. She also emphasizes the institution’s commitment to scaling up these loans and tailoring them to the economic realities of these nations.
Global South : Complex concept and diverse leaders
The term « Global South » refers not to geography but rather to a socio-economic structure rooted in post-colonial contexts. This concept includes countries often defined by economies that rely on low-value-added exports of raw or manufactured goods. Economist Sara Stevano, a development expert, notes that these nations exist on the periphery of the global economy and remain largely dependent on major powers from the Global North, such as the United States and Europe.
Policymakers in these regions have limited influence, with narrower decision-making power compared to developed countries. In this context, the « Global South » also represents a coalition of nations sharing common interests when confronting global powers, particularly in trade, development, and climate change issues. The Group of 77 (G77), established within the United Nations, symbolizes this coalition by defending the collective economic interests of its 134 members and promoting South-South cooperation.
Dependency on the Dollar : Issue of economic sovereignty
The BRICS, comprising Brazil, Russia, India, China, and South Africa, are working to bolster the use of national currencies in their financial transactions. This effort is not only an economic strategy but also a stance against global dynamics dominated by the U.S. dollar.
Russian President Vladimir Putin, who joined Dilma Rousseff at a summit in Kazan, outlined the benefits of this shift to local currencies :
- Lowering debt costs for member countries
- Strengthening economic autonomy
- Reducing geopolitical risks associated with dollar fluctuations.
Concrete examples of local currency bond issuances
The NDB has already started transitioning toward local currency financing with concrete steps. In September 2024, the institution raised 1 billion ZAR, approximately 57 million USD, on the South African bond market. The issuance attracted bids exceeding 2 billion ZAR, underscoring investor enthusiasm for bonds in local currencies. The institution also recently announced a forthcoming issuance of bonds in Indian rupees, aligning with the Indian market’s specific needs and the bank’s monetary expansion policy.
The BRICS bank also prioritizes the Chinese yuan among local currencies. The NDB is progressively diversifying its funding sources to include additional member currencies and those of nations interested in partnership with this geopolitical group. This diversification bolsters the financial autonomy of Global South countries and fosters an economic environment less vulnerable to international volatility.
New growth phase for the BRICS
Dilma Rousseff highlights the evolution of the BRICS alliance toward a growth phase marked by expansion and openness to new members. « Integrating new Global South countries into this dynamic is a priority », she adds, envisioning an enlarged coalition capable of providing resilient and tailored financial solutions. Established in July 2015, the NDB has since 2021 welcomed new members beyond the BRICS founders, including Bangladesh, Egypt, the United Arab Emirates, and Uruguay.
The BRICS New Development Bank’s initiative to offer local currency financing represents a major turning point in supporting Global South countries. This strategy emphasizes increased autonomy, South-South cooperation, and essential financial stability amid contemporary economic challenges. Through impactful projects and diversification of its activities, the NDB provides member countries with a robust and sustainable alternative in an ever-evolving economic landscape.
