BRICS+ Series: How the BRICS Reserve Arrangement is Challenging Western Financial Dominance

The CRA (Contingent Reserve Arrangement), established in 2014 by BRICS, is a tool for providing liquidity support and financial stability to its member countries during economic crises. The CRA reduces reliance on Western-centric financial institutions like the IMF and its significance has grown in 2025, with the addition of Egypt, Ethiopia, Iran, and the UAE (with Saudi Arabia pending finalisation) in 2024 and Indonesia in 2025. The CRA is emerging as a crucial tool for financial sovereignty and economic stability within the Global South.

Strengthening the CRA in a New BRICS Era

The initial BRICS members created the Contingent Reserve Arrangement (CRA) and committed $100 billion to address short-term balance of payments issues. With the recent expansion of BRICS membership, the CRA's capacity and operational mechanisms need to be updated to align with the current economic realities of the expanded bloc. This means multiple things. First is that the CRA's reserve pool could expand significantly beyond its initial $100 billion due to the major financial powerhouses of Saudi Arabia, the UAE, and China joining BRICS. A larger capital base would boost the CRA's credibility and effectiveness in preventing currency crises among member states. Secondly, originally the CRA was heavily reliant on the U.S. dollar, with 70% of its funds accessible solely through IMF-linked conditionalities. To establish true financial sovereignty, the expanded BRICS alliance must prioritise increasing the proportion of local currencies used in CRA transactions. This strategic move aligns with the bloc's broader de-dollarisation initiative. Lastly, given the economic disparities among BRICS nations, restructuring the CRA's governance is essential. This restructuring should reflect the varying contribution capacities and financial needs of new members. For instance, stronger economies like China and Saudi Arabia should assume greater lender responsibilities, while countries like Ethiopia and South Africa, with greater needs, should have increased access to emergency liquidity.

The CRA as a Counterweight to the IMF

The IMF's structural adjustment policies have been controversial in the Global South due to their punitive nature. The CRA presents a potential alternative by offering stabilising support without the austerity measures often imposed by the IMF. By expanding and reforming the CRA, it could support development and economic growth in a way that the IMF’s rescue packages, with their growth-stifling policies, have not.

Real-World Application: Case Studies in 2025

1. Ethiopia’s Foreign Exchange Crisis: Ethiopia's economy is burdened by a high import bill and limited foreign reserves, resulting in foreign exchange shortages. An enhanced CRA could rapidly inject liquidity to stabilise the Ethiopian birr, potentially eliminating the need for IMF intervention.
2. Russia-Iran Financial Integration: Russia and Iran can circumvent Western-controlled SWIFT systems by utilising alternative transaction networks like the Russian SPFS (Sistema Peredachi Finansovykh Soobshcheniy)  and China's CIPS (Cross-Border Interbank Payment System). This CRA-backed financial cooperation is a direct response to ongoing Western sanctions.
3. Brazil and South Africa’s Trade Stability: The CRA can be utilised by commodity-dependent economies, such as Brazil and South Africa, to stabilise their trade sectors and safeguard them from the impacts of speculative currency fluctuations and external shocks.

Challenges and the Path Forward

The CRA has enormous potential, but it must overcome obstacles to become a true rival to Western financial dominance. The CRA needs a mechanism to rapidly disburse funds without bureaucratic delays. Decision-making within the CRA could be hindered by the differing geopolitical priorities of the BRICS nation. To bolster trust, the BRICS nations should prioritise transparent governance within the CRA's operations, possibly by incorporating AI-powered models for financial risk assessment.

Conclusion

The CRA must develop into a robust financial safety net as BRICS's economic and geopolitical influence expands. This will shield the Global South from Western financial dependency. The CRA can establish the groundwork for a new financial architecture by increasing funding, strengthening governance, and committing to de-dollarisation. This new architecture will empower emerging economies rather than subjugate them to outdated financial hegemonies. BRICS must act decisively in 2025 to ensure its financial resilience in a rapidly changing global order.

Written by:

*Dr Iqbal Survé

Past chairman of the BRICS Business Council and co-chairman of the BRICS Media Forum and the BRNN

*Sesona Mdlokovana

Associate at BRICS+ Consulting Group

UAE & African Specialist

**The Views expressed do not necessarily reflect the views of Independent Media or IOL.