Specialists explain the reasons for besieging the dollar crisis for some countries

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Specialists explain the reasons for besieging the dollar crisis for some countries

2023.08.18 - 08:56

 

Baghdad - Nas  

The “dollar scarcity crisis” suffocates a group of emerging economies, both in terms of internal factors and policies that affect the availability and circulation of hard currency, as well as the influence of those countries by external factors related to the direct and indirect repercussions of international crises and geopolitical developments in the world.. What are the most prominent of these reasons?  

 

The most prominent causes of the dollar crisis in some emerging economies can be summarized in a number of basic factors, as follows:  

  

Balance of international transactions: If emerging economies depend heavily on their imports from abroad, such as goods and services, they will need dollars to conduct these transactions. While some of these economies suffer from a deficit in the balance of transactions (the difference between imports and exports), this leads to an increase in demand for dollars against local currencies, which in turn leads to a shortage of dollars in the local market.  

  

The cost of external debt: The cost of debt burdens developing countries, which need to provide dollars to pay off those debts and their interest. And if there is a fear that these countries will not be able to pay their debts, then this could lead to a decline in the value of their currencies against the dollar, which would make it more difficult to obtain hard currency.  

  

Geopolitical and economic developments: Geopolitical and economic tensions in the world, political conflicts and the accompanying imposition of economic sanctions, affect the stability of the local currency and undermine confidence in it, which makes people (investors) and companies search for a safe haven, and this haven is usually represented in the US dollar. , which raises the demand for it.  

  

Declining capital flows: In light of the current economic conditions, investment rates are declining in emerging countries, and investors are withdrawing their money and investing it in more stable and safe places, with the escape of hot money.  

  

Fluctuations in commodity markets: If emerging economies rely heavily on commodity exports such as oil or minerals, the price fluctuations of these commodities greatly affect their revenues, and this would put pressure on the local currency and increase the need for dollars to finance imports.  

  

Domestic policies: Some emerging countries adopt policies to restrict the flow of capital out of the country, and this could affect their ability to obtain dollars easily.  

  

Why do central banks suffer from a dollar shortage?  

Dr. Mahmoud Anbar, advisor to the World Bank, says that one of the most important reasons complicating the dollar crisis for many economies around the world, especially emerging economies, is related to the consequences of global developments, in a manner that caused the disruption of international trade, after the Corona pandemic. And then the war in Ukraine.  

  

Uncertainty  

He adds to that, "the state of uncertainty imposed by the global economic crisis that the world is currently experiencing, as it has in turn disrupted everything related to the entry of hard currencies into many economies, especially in the economies of some emerging countries."  

  

He refers here to the report issued by the United Nations Conference on Trade and Development (UNCTAD), which revealed a decline in foreign investment flows, considering that this decline is a "logical matter" due to the uncertainty imposed by the pandemic, which made many investors stop investing in one way or another. Or in favor of alternative investment channels.  

  

The United Nations said that total global foreign direct investment fell 12 percent in 2022, to $1.3 trillion, after a sharp decline in 2020 and a strong recovery in 2021.  

  

According to UNCTAD, this "slowdown was driven by multiple global crises, namely the war in Ukraine, rising food and energy prices, and debt pressures."  

  

UNCTAD expects that the downward pressure on foreign direct investment will continue in 2023.  

  

Foreign direct investment in developing countries increased 4 percent to 916 billion dollars, and it represents more than 70 percent of global flows, which is a record share. However, this growth is concentrated in a small number of large emerging economies.  

  

Geopolitical tensions  

Among the most prominent reasons reinforcing the dollar crisis for some emerging economies, Anbar talks about the impact of economic sanctions, whether by Russia, the West, and the United States, and the repercussions of those sanctions on developing countries, pointing to the use of energy weapons by Russia to try to subjugate Europe as one of the most important reasons that greatly affected the economy. The economies of those countries, given that this created a large state of imported inflation in addition to the existing inflation from the beginning, which led to an increase in the cost of energy and pressure on the hard currency.  

  

Among the reasons given by the World Bank consultant also, in his speech, is “what is related to the disruption of supply chains, as well as the use of food weapons in the ongoing wars, which raises the cost of imports, which depletes the capabilities of developing countries and their dollar financial resources.  

  

At the same time, he also notes the impact of the sources of foreign exchange coming to these economies, whether from remittances or the tourism sector and direct investments, under the weight of the economic conditions the world is witnessing, and in light of the current uncertainty that no one can predict its fate.  

  

At the same time, Amber does not exclude the controversy surrounding the “future of the dollar” itself as a major factor in the crisis, in terms of the BRICS countries seeking a special currency with the expansion of member states, and then the threat of the US dollar, and therefore the inability to predict the future of the US operation raises Investor concerns.  

  

He concludes his remarks by noting that "the continuation of the status quo is liable to cause major catastrophes and greater complications, especially since the instability of the economic map leads to the instability of the political maps as well."  

  

  

Source: "Sky News Arabia Economy"  

  

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https://english.alarabiya.net/News/world/2023/08/17/BRICS-Summit-2023-agenda-All-you-need-to-know

A view of a reflection on a window of a man staring at the sea in front of the national flags of the on the the BRICS (China, India, Russia, South Africa, Brazil) countries during the BRICS Foreign Ministers Meeting in Cape Town, on June 02, 2023. (AFP)

BRICS Summit 2023 agenda: All you need to know

 

 

Yusra Asif, Al Arabiya English

Published: 17 August ,2023: 12:25 PM GSTUpdated: 17 August ,2023: 03:33 PM GST

 

 

BRICS is a bloc of emerging world economies – Brazil, Russia, India, China and South Africa – aimed at developing trade and economic cooperation among its member nations.

The acronym “BRIC” was originally coined by Goldman Sachs economist Jim O’Neil in 2001. South Africa was added to the group in 2010 when the bloc extended its membership to another continent.

 

Russia organized BRIC’s first meeting in 2006, with foreign ministers from Brazil, Russia, India and China in attendance. They discussed the economic bloc’s shared interests and common challenges – the most prominent being the rising US influence on world order.

According to World Bank statistics, BRICS accounts for more than 40 percent of the world’s population, and the combined GDP is more than $23 trillion – 26 percent of the global economy.

 

Where and when is the summit?

BRICS will hold its 15th heads of state and government summit in Johannesburg, South Africa from August 22-24. The summit will be the first in-person meeting of the group since the coronavirus pandemic.

Who will attend BRICS summit?

The world leaders expected to attend the summit include South African President Cyril Ramaphosa, Chinese President Xi Jinping, Brazil’s President Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi.

Russian President Vladimir Putin will not attend the summit, Moscow announced in July. His absence is due to an arrest warrant issued against him by the International Criminal Court (ICC). If he arrives in South Africa, he would be subject to the ICC’s warrant.

Instead of Putin, Russia’s foreign minister Sergei Lavrov will represent Moscow at the summit. Putin, however, will not miss the meeting. According to Russian state media, he will reportedly participate in the conference via video.

 

Heads of states pose for a group picture at the BRICS summit meeting in Johannesburg, South Africa, July 27, 2018. (Reuters)

BRICS has also extended invitations to 67 world leaders across Africa, Latin America, Asia and the Caribbean.

Twenty dignitaries will attend the summit, including the UN Secretary General Antonio Guterres, the African Union Commissioner Moussa Faki Mahamat and the President of the BRICS’ New Development Bank. According to Reuters reports, prominent business leaders in the region are also expected to be in attendance.

What are key issues on the agenda?

Other than developing economic relations and trade infrastructure, one of the most pressing issues on the summit’s agenda is BRICS’ expansion, with several nations from Asia, Africa and Europe vying to join the bloc.

While the group’s stance on expansion is divided – China and Russia have embraced it, but India remains opposed to Beijing’s plans – as many as 40 countries have reportedly shown interest in joining the bloc formally or informally. These include Algeria, Belarus, Saudi Arabia, UAE, Iran, Indonesia, Argentina, Ethiopia and Egypt.

Another item on the bloc’s agenda that has gained traction and attracted media headlines is the push from BRICS to conduct more cross-border trade in local currencies to reduce the group’s reliance on the US dollar.

Several reports of a new BRICS’ currency also emerged in the months preceding the summit, with some economic experts claiming that the economic bloc may, in the future, push for de-dollarization – reducing the US dollar’s dominance in global trade and finance.

However, according to a Bloomberg report, South Africa’s ambassador to the bloc, Anil Sooklal, said there are no plans to discuss replacing the US dollar.

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Russian President Vladimir Putin shakes hands with South African President Cyril Ramaphosa during their meeting following the Russia-Africa summit in Saint Petersburg, Russia, July 29, 2023. (File photo: Reuters)

BRICS leaders meet to discuss expansion and geopolitical influence

 

 

 

Reuters

Published: 17 August ,2023: 04:01 AM GSTUpdated: 17 August ,2023: 04:55 AM GST

 

 

BRICS leaders meet in South Africanext week to discuss how to turn a loose club of nations accounting for a quarter of the global economy into a geopolitical force that can challenge the West’s dominance in world affairs.

Russian President Vladimir Putin, who faces an international arrest warrant over alleged war crimes in Ukraine, will not join leaders from Brazil, India, China and South Africa amid rifts over whether to expand the bloc to include dozens of “Global South” nations queuing up to join.

 

 

South Africa will host Chinese President Xi Jinping, Brazil’s Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi for the BRICS summit from August 22 to 24.

Spread over the globe and with economies that operate in vastly different ways, the main thing uniting the BRICS is scepticism about a world order they see as serving the interests of the United States and its rich-country allies who promote international norms they enforce but don’t always respect.

 

Few details have emerged about what they plan to discuss, but expansion is expected to be high on the agenda, as some 40 nations have shown interest in joining, either formally or informally, according to South Africa. They include Saudi Arabia, Argentina and Egypt. 

“BRICS AND AFRICA”

China, seeking to expand its geopolitical influence as its tussles with the United States, wants to enlarge BRICS quickly, while Brazil is resisting expansion, fearing the already unwieldy club could see its stature diluted by it.

In a written response to Reuters questions, China’s foreign ministry said it “supports progress in expanding membership, and welcomes more like-minded partners to join the ‘BRICS family’ at an early date.”

Russia needs friends to counter its diplomatic isolation over Ukraine, and so is keen to bring in new members, as is its most important African ally, South Africa.

India is on the fence.

In a nod to the bloc’s African hosts, the theme of its 15th summit is “BRICS and Africa”, emphasising how the bloc can build ties with a continent increasingly becoming a theatre for competition between world powers.

South Africa’s foreign minister Naledi Pandor in a statement last week said BRICS nations wanted to show “global leadership in addressing the needs ... of the majority of the world, namely ... development and inclusion of the Global South in multilateral systems,” in a veiled swipe at Western dominance.

BRICS nations are keen to project themselves as alternative development partners to the West. China’s foreign ministry said BRICS sought to “reform global governance systems (to) increase the representation ... of developing countries and emerging markets.”

The bloc’s New Development Bank (NDB) wants to de-dollarise finance and offer an alternative to the much-criticised Breton Woods institutions.

But it has approved only $33 billion of loans in nearly a decade -- about a third of the amount the World Bank committed to disbursing just last year -- and has recently been hobbled by sanctions on member Russia.

South African officials say talk of a BRICS currency, mooted by Brazil earlier this year as an alternative to dollar-dependence, is off the table.

With 40 percent of global population, the BRICS carbon-intensive nations also make up about the same share of greenhouse gas emissions. Officials in Brazil, China and South Africa said climate change may come up but indicated it wouldn’t be a priority.

BRICS countries blame rich nations for causing most global warming and want them to take on more of the burden of decarbonising the world’s energy supply. China was accused of blocking climate discussions at the G20, which it denied.

https://english.alarabiya.net/News/world/2023/08/17/BRICS-leaders-meet-to-discuss-expansion-and-geopolitical-influence