In his interview with theIzvestia daily, Yevgeny Goryunov, Senior Researcher of the Gaidar Institute shared his opinion on whether the creation of a new reserve currency will help replace 
the US dollar and reduce financial risks for BRICS member countries.

According to financers, investors and bankers interviewed by the Izvestia daily, the utilization of the US dollar as an instrument of political pressure has undermined its reputation of a reliable reserve currency. Experts are sure that BRICS member countries’ reserve currency can become the US dollar’s most likely rival. However, the process is complicated because the group of these countries cannot be regarded as an integrated union with close economic ties.

At the same time, the process of creating a new global reserve currency is not that easy as one may think. Some financers share this scepsis. In the next few years (and, probably, decades), BRICS member countries’ currencies can hardly challenge as reserve currencies the US dollar or euro, experts believe. However, the Chinese yuan has a potential to increase its share in the reserves (it is currently equal to about 3% of the global volume of currency reserves as compared with 60% and 20% of the US dollar and euro, respectively).

To claim the role of a reserve currency, at least three conditions are to be met, Yevgeny Goryunov explains. Firstly, a well-developed financial sector providing ample opportunities to make financial investments (including investments in low-risk securities, that is, government bonds) should be in place. Secondly, the currency should be stable and it suggests a low inflation. Thirdly, barriers for trans-border operations with financial assets should be minimal and the currency, freely convertible. At present, none of BRICS countries has complied with these conditions, Yevgeny Goryunov notes. China meets only the first two conditions, but its financial account is not liberalized.

“The creation of an international currency by Russia and China is highly unlikely at least owing to an explicit incomparability of Russia’s and China’s shares in the global economy (as regards GDP, exports, imports, national financial market capitalization and other). And what is more, the reasons are not clear for which the Chinese government may take seriously the idea of creating a reserve currency. It is more logical to boost the circulation of the yuan by making it more available and convenient for nonresidents,” Yevgeny Goryunov summed it up.