Despite recent sluggish growth, the world’s leading emerging-market economies have banded together to form a $50 billion development bank that will act as an alternative to the International Monetary Fund and the World Bank, reports Bloomberg.
This measure, as well as the launch of a $100 billion currency exchange reserve for use in a payment crisis, are two notable initiatives that have resulted from the sixth BRICS Summit in Fortaleza, Brazil.
The bank will fund infrastructure and development projects in BRICS countries and is seen as a step toward ending the dominance of the U.S. dollar and Western lending institutions.
The leaders of the five BRICS nations proposed that the bank be headquartered in Shanghai with India serving as its first “rotating presidency.” The Chinese city had a special allure, the Russian Finance Minister Anton Siluanov told the media, because of its superior infrastructure, private funding opportunities and “[it] is home to more investors than the competitors.”
Each country will have a stake in the bank, with the board of governors’ first chairman being from Russia and its first board of directors’ chair coming from Brazil.
As for the joint currency reserve, each participating member state will be able to make withdrawals — but of varying amounts. For instance, writes Bloomberg, “China can withdraw half the amount it earmarks or $20.5 billion” while Brazil, Russia and India “may withdraw the same amount they commit or $18 billion.” And lastly, South Africa can withdraw up to $10 billion, twice the amount of its capital commitment.
Both initiatives are intriguing in light of the 5.4% economic growth shown this year by the five BRICS nations compared with their 10.7% growth seven years ago. But even with the economic slowdown, the BRICs are becoming important players on the world stage, Brazilian President Dilma Rousseff was quoted as saying at the summit.
“The BRICS are gaining political weight and demonstrating their role in the international arena,” she said.
Russian president Vladmir Putin, India Prime Minister Narendra Modi, China’s leader Xi Jinping and Jacob Zuma, South Africa’s president, were also in attendance at the summit.
Photo: www.kremlin.ru, CC BY 3.0