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Informist, Wednesday, Oct. 23, 2024

 

NEW DELHI – The leaders of the BRICS group of nations endorsed settlement of cross-border payments in local currency at the BRICS Summit that concluded on Wednesday in Kazan, Russia. They also discussed the feasibility of integrating the financial markets of the respective countries.

 

"We welcome the use of local currencies in financial transactions between BRICS countries and their trading partners," the Kazan Declaration said. "We encourage strengthening of correspondent banking networks within BRICS and enabling settlements in local currencies in line with BRICS Cross-Border Payments Initiative, which is voluntary and non-binding, and look forward to further discussions in this area."

 

India was seemingly the loudest advocate of local currency settlement at the meeting. Prime Minister Narendra Modi said settlement of trade and other cross-border payments in local currency can strengthen economic cooperation among BRICS countries.

 

Meanwhile, India's central bank, in its attempt to internationalise the rupee, had allowed exports and imports between two trading partners to be settled in rupee in 2022. The Reserve Bank of India has already signed memoranda of understanding with Russia and the UAE to enable trade settlement in local currency. It is in conversation with several other countries, including Indonesia, for the same.

 

BRICS is an intergovernmental organisation comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates. It aims to promote unified emerging economy perspectives in multilateral forums.

 

The leaders, at the three-day summit, envisaged setting up an independent cross-border settlement and depositary infrastructure called BRICS Clear. "It is an initiative to complement the existing financial market infrastructure, as well as BRICS independent reinsurance capacity, including BRICS (Re) Insurance Company, with participation on a voluntary basis," as per the Kazan Decleration. 

 

The leaders have tasked their finance ministers and central bank governors to continue the consideration of the issue of local currencies, payment instruments and the set-up of BRICS Clear. The ministers and governors will report back to the leaders on these subjects by the next presidency of the BRICS.

 

The BRICS leaders also collectively agreed to reject the Carbon Border Adjustment Mechanism imposed by the European Union. "We reject unilateral, punitive and discriminatory protectionist measures, that are not in line with international law, under the pretext of environmental concerns, such as unilateral and discriminatory carbon border adjustment mechanisms," the Declaration said. "We also oppose unilateral protectionist measures, which deliberately disrupt the global supply and production chains and distort competition."

 

To mitigate the risks of climate change, the EU has announced a phased implementation of the Carbon Border Adjustment Mechanism. Under this, those exporting goods to the EU have to report the carbon content of the commodity, based on which, they would be taxed. The carbon tax collection is expected to begin from 2026.

 

India has voiced its stance against imposition of this carbon tax in several instances. In the past, both Finance Minister Nirmala Sitharaman and Commerce Minster Piyush Goyal have called the EU's carbon tax unfair and arbitrary.  End

 

Reported by Krity Ambey

Edited by Tanima Banerjee

 

 

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