BUSINESS & ECONOMY

Upgrading Bretton Woods: A Case for “Currency Baskets”

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2 years ago

January 17, 2023

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By Yaroslav Lissovolik

In recent years, shortages and insecurities have increasingly afflicted the global economy as it was grappling with issues such as supply-side disruptions, energy shortages and food security concerns. In the field of international finance, the world’s central banks had their fair share of risks, with one of the key shortages being the sore lack of reserve currencies coupled with few diversification options in allocating currency reserves. These concerns were magnified in 2022 after the escalation of geopolitical risks and the imposition of sanctions on Russia’s reserve assets in the hundreds of billions of dollars.

Such developments put into question the security of the dollar-centered international monetary system, rekindling discussions on the prospects of new reserve currencies such as the BRICS reserve currency. The new entrants in the international currency reserve space that are likely to emerge may include not only national reserve currencies but also currency baskets. If successful, these new entrants can transform the global monetary system towards greater optionality and lower exposure to geopolitical risks.

Among the new entrants in the reserve currency space is China’s yuan, a national reserve currency that has—slowly but surely—been taking a greater share of currency reserves and transactions in the global economy. Just like the dollar and any other national currency, however, the yuan may be susceptible to country-specific vulnerabilities, sanctions and swings in geopolitical risks.

Thus far, an expansion in the pool of reserve currencies composed of national currencies has progressed very slowly, raising the question of whether any significant change in the monetary system is possible, given the sole focus on national reserve currencies. Hence discussions revolving around a BRICS reserve currency as a currency basket that brings together the currencies of India, Russia, Brazil, China and South Africa.

The proposal to create a new reserve currency based on a basket of BRICS currencies was first formulated by the Valdai Club in 2018. The idea was to create an SDR-type currency basket composed of the BRICS’s five national currencies, potentially involving some of the other currencies in the BRICS+ circle economies. The choice of the composition of the BRICS currency basket had to do with the fact that these were among the most liquid currencies across emerging markets. The name for the new reserve currency — R5 or R5+ — stemmed from the first letters of the BRICS currencies, all of which begin with an R (the real, the ruble, the rupee, the renminbi, and the rand).

The new BRICS reserve currency basket could act in concert with the stronger role performed by BRICS national currencies to take on a greater share of the total pie of currency transactions in the world economy.

There are a number of advantages exercised by currency baskets such as the proposed BRICS reserve currency. First, there is the reduction in the dependency/exposure to any single country risk, with cross-regional currency baskets reducing the exposure to risks pertaining to any single region. Second, there is the reduction in the risks associated with the high volatility of any single Global South currency, as the platform that brings together currencies from economies with divergent trade profiles and varying exposure to shocks will result in a lower volatility of the currency basket as such. For the Global South, a basket mechanism for the new reserve currency could serve as an incubator of new national reserve currencies. In the case of the BRICS reserve currency, the advanced status of the Chinese yuan could be used to prop up the status and the potential reserve role for the currencies of other BRICS (or BRICS+) nations.

The emergence of new currencies as well as greater use of more national currencies or baskets of national currencies could also reduce the costs resulting from an excessive dollarization of the world economy. Existing research points to significant costs sustained by the countries with relatively high levels of dollarization, with one such study noting that “the presence in residents’ portfolio of foreign-currency assets and liabilities (or ‘financial dollarization’) has been alleged to influence monetary policy in developing economies and, especially, to cause debtors’ insolvency in the aftermath exchange rate depreciations (the ‘balance sheet effect’)… [Furthermore,] financially dollarized economies display a more unstable demand for money, a greater propensity to suffer banking crises after a depreciation of the local currency, and slower and more volatile output growth, without significant gains in terms of domestic financial depth. The results indicate that active de-dollarization policies may be advisable for the many economies.”

Most importantly, in a world of sharply higher geopolitical risks, a currency basket mechanism becomes one of the better instruments (compared to national currencies) in reducing the exposure to geopolitical risks and economic restrictions emanating from any one single country or region. The reduction of geopolitical risks will be the more significant, the more geopolitical heterogeneity there is in the currency basket. In this respect, a BRICS reserve currency is quite balanced as it brings together differing countries such as China and Russia on the one hand (with significant geopolitical competition with the West) and countries such as Brazil and India on the other (significantly more cooperative relations with the West).

For the new currencies to be more competitive on the international stage compared to the “incumbent currencies” such as the U.S. dollar, the new entrants need to carry a legal affirmation of the non-use of such currencies in sanctions or restrictive measures. Such a de-politicization of new currencies would render them significantly more attractive for the Central Banks in the midst of elevated geopolitical risks. A non-sanctions/depoliticization clause could be included into the charter/norms governing the new reserve currency. In the case of regional currencies, this may be undertaken by the respective regional financing arrangements (RFAs), while in the case of cross-regional projects such as the BRICS reserve currency such norms should come from the BRICS Contingent Reserve Arrangement (BRICS CRA).

Therefore, the existing global currency represented by a currency basket—Special Drawing Rights (SDR)—has the potential to significantly expand its presence in global currency reserves and currency transactions. It has the benefit of bringing together the most liquid currencies in the world, with the heterogeneity of the basket attained via the inclusion of the four currencies from the advanced economies (USD, Euro, Japanese Yen and the UK’s Pound Sterling) as well as the Chinese yuan. The IMF, as the regulator of the SDR, could potentially enhance its role in the global economy through allowing its use in international trade transactions as well as raising its attractiveness as an instrument of currency reserve holdings for the world’s central banks. According to a prominent American economist Maurice Obstfeld, “denominating more global reserves in SDR would affect exchange rate volatility among the main reserve currencies primarily to the extent that it reduced potential official demand shifts among those currencies. Were more countries to peg to the SDR as a result, however, their effective nominal (and probably real) exchange rate volatility would fall”.

The IMF itself points to tangible advantages in the greater use of SDRs in the global economy, including with respect to lowering the volatility of financial market instruments: “M-SDRs [SDR-denominated financial market instruments] reduce foreign exchange and interest rate risk relative to single-currency instruments, but there are some drawbacks and challenges. The basket nature of M-SDRs would allow the volatility of returns to be lower than for a similar single currency instrument”.

Similarly, the establishment of a BRICS reserve currency could well reduce the volatility in the EM currency space, including via the issuance of financial instruments with lower volatility of returns. The R5 could also serve as an important benchmark for other parts of EM—rather than pegging to the U.S. dollar or the SDR, BRICS’s regional partners as well as other EM economies could peg their currencies to the BRICS currency basket. The projects of new regional currencies currently entertained by the regional blocks in the developing world (Latin America being one case in point in line with the statements of Brazil’s president Lula da Silva) could potentially be pursued on the basis of a basket mechanism and/or with the possibility of pegging the new currency to the BRICS basket.

The bottom line is that we are only at the start of what may turn out to be an emphatic expansion in the array of reserve currencies with currency baskets being potentially among the most competitive and flexible instruments in the global economy. Such currency baskets could well include new regional currencies, if and when they emerge, as well as cross-regional currency baskets. The variety of the combinatorics of such reserve currency platforms can significantly expand the optionality of reserve allocation for the world’s central banks. The future of the new international monetary system is paved with new reserve currencies.

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BUSINESS & ECONOMY

What is the Role of Bosnia in Strengthening Halal Supply Chains in Europe?

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5 days ago

March 20, 2025

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Hafiz M. Ahmed

Imagine walking into a supermarket in Paris, Berlin, or London, scanning the shelves for halal-certified products. You pick up a pack of chicken, a bottle of olive oil, and a box of cookies, all bearing the halal logo. But have you ever wondered how these products made it to the shelf? Behind every halal-certified item lies a complex supply chain that ensures its authenticity, safety, and compliance with Islamic principles. In Europe, where the demand for halal products is growing rapidly, building a reliable and transparent halal supply chain is no small feat. Enter Bosnia and Herzegovina, a country that has emerged as a key player in strengthening halal supply chains across the continent.

With its deep-rooted Islamic heritage, cutting-edge certification processes, and collaborative approach, Bosnia is setting a new standard for halal integrity in Europe. This article explores Bosnia’s pivotal role in creating a robust halal supply chain, its collaborations with other halal-certified organizations, and why its efforts matter for businesses and consumers alike.

The Growing Demand for Halal Products in Europe

Europe is home to over 25 million Muslims, a number that is expected to grow in the coming years. This demographic shift has fueled a surge in demand for halal products, from food and beverages to cosmetics and pharmaceuticals. According to a report by Statista, the European halal food market alone is projected to reach $30 billion by 2025. However, meeting this demand is not without its challenges.

One of the biggest hurdles is ensuring the integrity of the halal supply chain. From farm to fork, every step of the process must adhere to strict halal standards. This includes sourcing halal-certified raw materials, using compliant processing methods, and maintaining transparency throughout the supply chain. For businesses, this requires a high level of coordination and expertise—something that Bosnia has mastered.

Bosnia’s Expertise in Halal Certification: A Foundation for Trust

Bosnia and Herzegovina has long been a leader in the global halal industry, thanks in large part to its Agency for Halal Quality Certification (AHQC). Established in 2007, the AHQC is renowned for its rigorous standards and transparent processes. But Bosnia’s contribution to the halal industry goes beyond certification; it plays a critical role in strengthening halal supply chains across Europe.

Here’s how Bosnia is making a difference:

Setting Rigorous Standards: The AHQC’s certification process is one of the most stringent in the world. It covers every stage of production, from sourcing raw materials to packaging and distribution. This ensures that products bearing the Bosnia Halal Certification logo meet the highest standards of quality and compliance.
Promoting Transparency: Transparency is at the heart of Bosnia’s approach to halal certification. The AHQC requires detailed documentation and conducts regular audits to ensure ongoing compliance. This level of transparency builds trust among consumers and businesses alike.
Leveraging Technology: Bosnia is at the forefront of using technology to enhance halal supply chains. From blockchain to track and trace systems, the country is leveraging innovative solutions to ensure the integrity of halal products.

Collaborations: The Key to a Stronger Halal Supply Chain

Bosnia’s success in strengthening halal supply chains is not a solo effort. It is the result of strategic collaborations with other halal-certified organizations, businesses, and government bodies across Europe. These partnerships have been instrumental in creating a more reliable and transparent halal ecosystem.

Partnerships with Halal-Certified Businesses: Bosnia works closely with businesses that are committed to halal integrity. By providing them with certification and guidance, the AHQC helps these companies navigate the complexities of the halal supply chain.
Collaborations with International Halal Organizations: Bosnia is an active member of global halal organizations such as the AHAC – Association of halal Crttifiers. These collaborations ensure that Bosnia’s standards align with international best practices.
Government Support: The Bosnian government has been a strong advocate for the halal industry, providing funding and support for initiatives that promote halal integrity. This has enabled the AHQC to expand its reach and impact.
Educational Initiatives: Bosnia is also investing in education and training to raise awareness about halal standards. Through workshops, seminars, and publications, the AHQC is helping to build a more informed and skilled workforce.

Bosnia’s Impact on the European Halal Market

To understand the real-world impact of Bosnia’s efforts, let’s look at a case study. In 2020, a major European supermarket chain partnered with the AHQC to source halal-certified poultry products. The collaboration involved:

Sourcing: The AHQC worked with farmers and suppliers to ensure that the poultry was raised and processed in accordance with halal standards.
Certification: The AHQC certified the entire supply chain, from the farm to the supermarket shelf.
Transparency: The supermarket chain used blockchain technology to provide consumers with real-time information about the product’s journey.

The result? A 20% increase in sales of halal-certified poultry products within six months. This success story highlights the tangible benefits of Bosnia’s approach to halal supply chain management.

Why Bosnia’s Role Matters for Europe

Bosnia’s contributions to the halal industry have far-reaching implications for Europe. Here’s why:

Consumer Confidence: By ensuring the integrity of halal supply chains, Bosnia is helping to build consumer confidence in halal-certified products. This is crucial in a market where trust is paramount.
Economic Growth: The halal industry is a significant driver of economic growth. By strengthening halal supply chains, Bosnia is creating new opportunities for businesses and boosting the European economy.
Cultural Integration: The halal industry plays a vital role in promoting cultural integration. By providing high-quality halal products, Bosnia is helping to meet the needs of Europe’s diverse population.
Global Leadership: Bosnia’s expertise in halal certification and supply chain management positions it as a global leader in the industry. This not only enhances its reputation but also sets a benchmark for other countries to follow.

Challenges and the Way Forward

While Bosnia has made significant strides in strengthening halal supply chains, challenges remain. These include:

Standardization: Despite Bosnia’s efforts, there is still a lack of uniformity in halal standards across Europe. This can create confusion for businesses and consumers.
Fraud and Mislabeling: The rise of counterfeit halal products is a growing concern. Bosnia is addressing this issue through stricter regulations and advanced tracking technologies.
Awareness: Many consumers and businesses are still unaware of the importance of halal certification. Bosnia is tackling this through educational initiatives and outreach programs.

Looking ahead, Bosnia’s focus will be on fostering greater collaboration, leveraging technology, and raising awareness about halal standards. By doing so, it aims to create a more robust and transparent halal supply chain that benefits everyone.

Bosnia and Herzegovina has emerged as a beacon of reliability and transparency in the European halal industry. Through its rigorous standards, innovative solutions, and collaborative approach, the country is playing a pivotal role in strengthening halal supply chains across the continent. For businesses, this means access to a growing market and a trusted partner in halal certification. For consumers, it means peace of mind knowing that the products they purchase meet the highest standards of quality and authenticity.

As the demand for halal products continues to rise, Bosnia’s contributions will become even more significant. By setting a benchmark for integrity and excellence, Bosnia is not only shaping the future of the halal industry in Europe but also inspiring the world to follow suit.

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BUSINESS & ECONOMY

Yousef Khalawi Outlines Strategies to Shape the Future of the Global Halal Economy at MFH 25

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3 weeks ago

March 4, 2025

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Hafiz M. Ahmed

In a talk at the Makkah Halal Forum 2025 , H.E. Mr. Yousef Khalawi , Secretary General of the Islamic Chamber of Commerce and Development (ICCD), shared his vision for shaping the future of the global halal economy. The session, titled “Strategies Shaping the Future of Halal,” was moderated by Dr. Wael Eldesouki Bedda , Secretary General of the Saleh Kamel Sustainable Entrepreneurship & Enterprise Development Organization (SKSEED), and provided attendees with a roadmap for driving innovation, sustainability, and inclusivity in the rapidly growing halal sector.

During the 20-minute interview, Mr. Khalawi emphasized the transformative potential of the halal industry,He outlined key strategies to position the halal economy as a force for ethical trade, environmental stewardship, and cross-border collaboration.

“The halal economy is not just about compliance—it’s about creating value that benefits humanity and the planet,” Mr. Khalawi stated. He highlighted the importance of aligning halal practices with the United Nations Sustainable Development Goals (SDGs), ensuring that growth in the sector contributes to poverty alleviation, gender equality, and climate action.

One of the central themes of the discussion was the role of technology in advancing the halal ecosystem. Mr. Khalawi praised the integration of blockchain, artificial intelligence (AI), and e-commerce as tools to enhance transparency, traceability, and consumer trust.

“Digital solutions are revolutionizing the halal supply chain,” he explained. “From farm to fork, blockchain ensures that products meet halal standards at every stage, while AI optimizes resource use and reduces waste.”

He also called for greater investment in halal tech startups, urging governments and private sectors to support innovation in areas like halal pharmaceuticals, logistics, and fintech.

Mr. Khalawi underscored the critical role of small and medium enterprises (SMEs) and women entrepreneurs in driving the halal economy forward. “SMEs are the backbone of the halal industry, and women are its untapped potential,” he said.

He highlighted initiatives led by the ICCD to provide training, funding, and market access to SMEs, particularly in underserved regions. Similarly, he praised programs empowering women entrepreneurs, noting that their leadership is essential to fostering inclusivity and innovation.

The interview also addressed the need for harmonized global standards to facilitate trade and build consumer confidence. Mr. Khalawi stressed the importance of partnerships between international organizations, governments, and private sectors to overcome barriers such as certification inconsistencies and trade restrictions.

“Unified standards are the foundation of trust,” he asserted. “By working together, we can create a seamless halal ecosystem that benefits producers and consumers alike.”

Mr. Khalawi commended Saudi Arabia’s leadership in advancing the halal agenda, aligning with the Kingdom’s Vision 2030 goals. He noted that Makkah’s unique position as the spiritual heart of the Islamic world makes it an ideal hub for fostering collaboration and innovation in the halal sector.

“Makkah is not just a host—it is a symbol of unity and ethical leadership,” he said. “This forum is a testament to the Kingdom’s commitment to shaping the halal future.”

Concluding the session, Mr. Khalawi issued a call to action for stakeholders across the halal ecosystem. “We must move beyond dialogue and take concrete steps to implement these strategies,” he urged.

Hafiz Maqsood Ahmed is the Editor-in-Chief of The Halal Times.

Courtesy: the Halal Times

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BUSINESS & ECONOMY

Can Trump Halt the BRICS De-Dollarization Effort?

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1 month ago

February 23, 2025

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Timothy Hopper

Various efforts to reduce reliance on the US dollar in global trade are putting the future of this dominant currency under a spotlight. Donald Trump, the newly elected US president, has returned to the global economic stage with the same aggressive style and approach as before. This time, Trump has set his sights on the BRICS group, launching threats and criticisms from the outset. BRICS, composed of major economies such as Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, is currently discussing the creation of a common currency that could challenge the dollar’s long-standing dominance in global trade.

Trump has responded to these moves with harsh rhetoric, threatening 100% tariffs and the complete exclusion of BRICS members from US markets should they continue to push for de-dollarization. Yet Trump’s remarks have drawn renewed global attention to the question of the dollar’s future.

Reacting to BRICS discussions about creating a rival currency or supporting the adoption of an alternative to the dollar—which would likely spell the end of the dollar’s dominance in global trade, a position it has held since World War II—Trump stated: “We urge these countries to abandon the idea of creating a rival currency or agreeing on an alternative to the dollar. Otherwise, they will face 100% tariffs, completely losing access to America’s unrivaled economic markets.” Recently, Trump also threatened to impose a 25% tariff on all imports from Canada and Mexico, along with an additional 10% tax on goods made in China.

On the surface, Trump’s tactics might seem like they could strengthen the dollar’s position; however, a deeper analysis suggests they will backfire. Instead of deterring BRICS countries, they might actually spur their efforts forward, with China in particular taking the lead to accelerate the de-dollarization process. Long suspicious of Washington’s use of the US dollar as a geopolitical tool, China has spent the last decade slowly building up alternative financial systems, for example by increasingly using the yuan for international trade settlement and expanding Beijing’s direct influence through the Belt and Road Initiative. The Chinese government has also diversified its foreign reserves, reducing its reliance on the US dollar in favor of gold and other currencies.

From this perspective, Trump’s statements are not a deterrent for BRICS countries but rather a rallying cry for urgent action. His persistent use of tariffs and sanctions as tools of economic diplomacy has not only deepened divisions between the United States and rival nations but also fueled distrust among US trading partners. This approach will undoubtedly drive other nations to seek alternatives to the dollar. China and Russia, as key targets of US sanctions and trade wars, are at the forefront of these changes, having signed agreements for trade in local currencies and deepened cooperation under the BRICS framework.

While the creation of a BRICS common currency or adoption of a US dollar alternative remains entangled in logistical and temporal challenges, the initiative symbolizes the bloc’s collective determination to build a financial system that is less reliant on the United States. Trump’s repeated threats may disrupt these efforts in the short term, but they will inevitably validate the concerns underlying these initiatives: the fear that the United States wields its economic power with little regard for long-term global financial stability, and solely in pursuit of its own unilateral interests.

For China, locked in strategic competition with the United States, shaping a new and favorable global order extends beyond economics. These initiatives are part of Beijing’s broader ambitions to establish itself as a global superpower. A multipolar financial system would reduce China’s and other BRICS countries’ vulnerability to US economic pressures, granting them greater freedom to pursue strategic goals on regional and global scales. For example, China’s digital yuan project is part of this vision, potentially serving as an alternative to dollar-based international payment systems, particularly in emerging markets.

Ultimately, the dollar’s dominance has been built primarily on trust—a belief that the United States will act as a responsible leader in the global economy and that dollar-based assets will remain stable and accessible. However, by weaponizing the dollar through sanctions and tariffs, Trump risks undermining this trust, not just among adversaries but also among allies. As this trust wanes, the dollar’s status as the world’s reserve currency is also weakened.

The paradox of Trump’s aggressive posture toward de-dollarization is that by favoring tariffs and sanctions, Trump is accelerating the very trends he seeks to combat. If he fails to change course, the world may soon find itself more united against Washington.

Courtesy: Geopolitical Monitor

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