BRICS creates development bank, ‘mini-IMF’

Published July 16, 2014
Delegates of the BRICS members countries sign the creation of their new development bank on July 15, 2014. AFP photo
Delegates of the BRICS members countries sign the creation of their new development bank on July 15, 2014. AFP photo

FORTALEZA: Leaders of the BRICS group of emerging powers on Tuesday created a Shanghai-based development bank and a reserve fund seen as counterweights to Western-led financial institutions.

The leaders of Brazil, Russia, India, China and South Africa agreed to launch the institutions to finance infrastructure projects and head off future economic crises.

“These initiatives show that, despite our diversity, our countries are committed to a solid and productive association,” Brazilian President Dilma Rousseff said at a summit in the northeastern seaside city of Fortaleza.

China says broad consensus reached on new BRICS bank

Russian President Vladimir Putin hailed the agreements as “a very powerful way to prevent new economic difficulties. “The five emerging nations first unveiled their plans last year. The New Development Bank aims to rival the Washington-based World Bank while the reserve is seen as a “mini-IMF. “BRICS leaders have pressed for reform of the International Monetary Fund to give developing countries more voting rights.

“The IMF urgently needs to review its distribution of voting power in order to reflect the unquestionable weight of emerging countries,” Rousseff said.

Shanghai headquarters

The development bank will have initial capital of $50 billion that could rise to $100bn, funded equally by each nation.

To ease worries of any nation getting more power than the other, BRICS leaders agreed to put the bank’s headquarters in Shanghai. The first president will be Indian while the first board chair will hail from Brazil.

An Africa Regional Center will be based in South Africa.

The bank will help emerging and developing nations mobilize resources for infrastructure and sustainable development projects, the summit declaration said.

The Contingent Reserve Arrangement will have $100bn at its disposal to head off potential economic volatility linked to the United States exiting its stimulus policy.

China is expected to make the biggest contribution, $41bn, followed by $18bn each from Brazil, India and Russia and $5bn from South Africa.

The summit comes as the economies of some BRICS countries, which together represent 40 percent of the world population and a fifth of the global economy, are cooling down, with Russia and Brazil expecting just one percent growth this year.

Experts say the new bank and fund will give the group the backbone of a formal organization.

Marathon summits

The talks in Fortaleza will open a series of marathon summits and bilateral meetings in Brazil.

Chinese President Xi Jinping met ahead of the summit with India’s new Hindu nationalist Prime Minister Narendra Modi, who described their first face-to-face talk as a “very fruitful meeting. “For Putin, who visited Argentina and Cuba before coming to Brazil, the trip gives him a chance to hammer home his calls for a “multipolar” world amid tensions with the West over the Ukraine crisis.

The meetings give Putin his first international summit since being kicked out of the G8 group of industrialized nations over the Ukraine crisis.

The United States is threatening to impose new economic sanctions on Russia over accusations that it is backing pro-Moscow separatist rebels in eastern Ukraine.

The BRICS summit declaration voiced “deep concern” over the situation in Ukraine and called for “comprehensive dialogue, the de-escalation of the conflict and restraint from all the actors involved, with a view to finding a peaceful political solution.

Published in Dawn, July 16th, 2014

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Price bombs
Updated 18 Jun, 2024

Price bombs

It just wants to take the easy route and enjoy the ride for however long it is in power.
Palestine’s plight
Updated 17 Jun, 2024

Palestine’s plight

While the faithful across the world are celebrating with their families, thousands of Palestinian children have either been orphaned, or themselves been killed by the Israeli aggressors.
Profiting off denied visas
17 Jun, 2024

Profiting off denied visas

IT is no secret that visa applications to the UK and Schengen countries come at a high cost. But recent published...
After the deluge
Updated 16 Jun, 2024

After the deluge

There was a lack of mental fortitude in the loss against India while against US, the team lost all control and displayed a lack of cohesion and synergy.
Fugue state
16 Jun, 2024

Fugue state

WITH its founder in jail these days, it seems nearly impossible to figure out what the PTI actually wants. On one...
Sindh budget
16 Jun, 2024

Sindh budget

SINDH’S Rs3.06tr budget for the upcoming financial year is a combination of populist interventions, attempts to...