Faced with currency volatility, BRICS, a grouping of major developing economies, including India, can work out a mechanism to settle trade in local currencies, South African Trade Minister Rob Davies has said.
“...in BRICS, we are discussing if we can actually structure our trade in a way based on the mechanisms...that settlement can be made based on the countries currency,” Davies told visiting reporters here.
Last year in March, in an initiative to promote trade in local currencies, the BRICS nations (Brazil, Russia, India, China and South Africa) signed two agreements to provide line of credit to business community and decided to examine the possibility of setting up a development bank on lines of multilateral lending agencies.
Davies expressed concern over the volatility in the currency market in the developing countries. “...currency movement takes place not really because of any dynamics in our country but because of dynamics in the world economy,” he added.
The pact on extending credit facility in local currency is being perceived as a step towards replacing the dollar as the main unit of trade between them.
India, too, has been trying to enter into bilateral agreements to promote trade in local currencies with a view to arrest the decline of the value of rupee against US dollar.
Commerce and Industry Minister Anand Sharma, who was here for the India-Africa Trade Ministers meet, said he has discussed with Davies about the issue of settling payments in local currency. “That is the way forward,” Sharma has said.
The Commerce Ministry has formed a task force to look into the issues pertaining to the swap of national currency for trade purpose.
The terms of reference of the task force are to examine various types of trading of goods in local currencies and their implications for India’s trade deficit. Besides, it will study the pros and cons of trading of goods in local currencies for trade.
Domestic currencies of countries, including India, South Africa and Brazil, have depreciated in the recent months.
Weighed down by global and local factors, the Indian rupee slid from 53.8 levels in April-end to 68.85 against the dollar in August.
India-Africa trade is expected to touch $100 billion by 2015 and $200 billion by 2020.