Leaders from Brazil, Russia, India, China and South Africa (BRICS) are expected to give the go-ahead for the creation of a common Development Bank – rivalling the IMF and the World Bank – during their joint summit in Durban on March 26-27, claimed several reports over the weekend.
According to the Wall Street Journal, citing a Brazilian official, the new bank could launch with a starting capital of $ 50 billion, with each of the five countries contributing an equal $10 billion share.
Additionally, the BRICS may also set up a Contingent Reserve Arrangement, an IMF-type fund with up to $120 billion from the countries' central bank reserves, which can be tapped by any of the BRICS in case of need.
If the plans succeed, it will be the first time, since the inaugural BRICS summit four years ago, that the group matches rhetoric with a concrete infrastructure for a more equitable global order.
For years, the five emerging nations, who represent 25 percent of the world’s GDP, have said that institutions like the World Bank, the IMF and the United Nations Security Council have not changed fast enough to reflect the developing world’s growing clout.
Fernando Pimenetel, the Brazilian minister for development, industry and foreign trade, though said that any new development bank was not meant to challenge the existing organisations, but rather to provide an alternative to the current financial system.
"The objective of the BRICS development bank is not to be a rival to any eisting multi-lateral organization. The objective of an eventual BRICS development bank will be to strengthen cooperation bonds between the BRICS countries and offer the world economy a new financing tool, or an alternative financing tool, especially for developing nations," Pimentel said, as cited by the Times Of India.
China’s Xi Jinping, who will mark his first international summit as China’s new president, added that the new bank would help bring more balance in global economy and promote democracy in international relationships.
"They (BRICS) have become an important political force for world peace and common development and play an important role in tackling international financial crisis and boosting global economic growth.
"In the meantime we hope all the countries in the world will pursue peaceful development to advance world peace and development. The Chinese dream of realising the great renewal has been the long cherished dream of the Chinese people since modern times", he said, according to PTI.
Western officials, on the other hand, have expressed caution, while World Bank chief economist and former Indian civil servant Kaushik Basu warned that setting a BRICS Bank would be a “humongous task”.
BRICS expert Oliver Stuenkel, at Getulio Vargas Foundation in Sao Paulo, told AFP that a development bank might partially be a reaction to the BRICS dimmed economic outlooks.
“Now Brazil is growing at an anaemic rate, South Africa is not doing so well and India growth is stalling, so the BRICS need to prove they can survive and prosper in challenging economic times,” he said. This is “a litmus test of their capacity to survive,” he added.