Joining BRICS an Easier Way to Drop US Dollar, Says Economist

By Suren Karr

Malaysia should consider joining the proposed BRICs currency union rather than resort to the proposed Islamic gold dinar as a reserve currency for international trade, says an economist. Ida Yasin of Universiti Putra Malaysia said the proposed BRICS currency would also be backed by gold and would be an easier step in the same direction.

The term BRICS refers to the grouping of major emerging economies Brazil, Russia, India, China, and South Africa, while Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates are expected to become members in January.

Ida said the use of the proposed BRICS currency as a reserve currency could weaken the power of the US dollar, and reduce its effects on the ringgit, which she said was undervalued.

The US dollar is the de facto world reserve currency and is dominant in international trade. It is also a major component of the basket of currencies used to determine the value of the Malaysian ringgit.

Prime Minister Anwar Ibrahim said the government would revisit the idea of using the gold dinar as a reserve currency. He said that if 5% to 6% of Islamic countries started using the gold dinar it would help reduce the dependence on the dollar.

However, economist Firdausi Suffian of Sabah UiTM said the dominance of the dollar would pose difficulties in shifting to the gold dinar as a reserve currency.

He said the dollar was “deeply embedded” as the main currency for international transactions in most countries.

Instead, he suggested the government put more focus on promoting exports and enhancing trading to make the ringgit more competitive.

“We also need to make clear our policies to boost investor confidence and trust,” he told FMT, citing the national energy transition roadmap as a good effort to inform potential investors of the country’s focus on renewable energy and electric vehicles.

Although the move to the gold dinar would benefit the economy, it would be effective only if a large bloc of countries were using it.

The gold dinar is an ancient currency dating from the 7th century. In 2019, former prime minister Dr Mahathir Mohamad proposed reviving the gold dinar as an international reserve currency for Muslim countries in preference to the US dollar.

Gold was the world’s reserve currency for most of the 20th century until US president Richard Nixon took the US off the gold standard in 1971.

This article orginally appeared at Free Malaysia Today