BRICS New Development Bank Soon To Be A Reality

The leaders of the BRICS (Brazil, Russia, India, China and South Africa) emerging market nations have launched a new international development bank set to rival the World Bank and International Monetary Fund (IMF). The move was signed off at a Brazil summit on Tuesday. The BRICS countries have agreed to set up a $100 billion

BRICS summit

The leaders of the BRICS (Brazil, Russia, India, China and South Africa) emerging market nations have launched a new international development bank set to rival the World Bank and International Monetary Fund (IMF). The move was signed off at a Brazil summit on Tuesday.

The BRICS countries have agreed to set up a $100 billion (about R1 trillion) joint United States (US) dollar currency reserve pool called the Contingent Reserve Arrangement (CRA) in order to provide emergency cash to countries faced with short-term crises or balance-of-payment problems.

It is set to compete with the World Bank and IMF by providing easier and faster access to large-scale financing. The new bank is set to give developing countries alternatives to the other institutions that are politically aligned with the US, according to Deutsche Welle.

According to Boston University professor of international relations, Kevin Gallagher, the bank could also be used to pressure developed countries, such as the US, to advance stalled measures to make global financial institutions more equitable.

“They can say, ‘look, we have an alternative’,” he told BDlive. “It gives you a lot of political leverage.”

But Peterson Institute for International Economics senior fellow, Arvind Subramanian, told BDlive the measure was not big enough to boost growth or cohesion in the BRICS group. He said the five member states were focused on domestic issues such as Brazil’s elections and the new economic policy plans in India.

“It’s hard to see a lot of impetus at this stage for the BRICS in general and for these initiatives in particular. There’s going to be a lot of attention on domestic issues,” he said.

According to BDlive, BRICS growth is estimated to average 5.37% this year, and is half the growth seen seven years ago.

The new development bank needs legislative approval from member states and at least one year to be implemented.

photo credit: Blog do Planalto via photopin cc


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