|The five-member BRICS countries account for roughly 18 per cent of the world’s GDP [AFP]|
The proposal of a development bank is high on the agenda at the summit of the five BRICS bloc nations – Brazil, Russia, India, China and South Africa – starting on Thursday in New Delhi.
The proposal for a “South-South” development bank in the mould of the World Bank is one of the main points to be discussed by the group of five rising powers at the fourth BRICS summit.
The initiative would allow the countries to pool resources for infrastructure improvements, and could also be used in the longer term as a vehicle for lending during global financial crises such as the one in Europe, officials said.
“What will be discussed (in New Delhi) is the possibility of setting up a BRICS development bank for infrastructure projects, development, not only in member countries but also in developing countries,” Maria Edileuza Fonteneles Reis, a senior Brazilian foreign ministry official, said.
Fernando Pimentel, the Brazilian industry and trade minister, told reporters in Brasilia last week, “the proposal to set up a BRICS bank, an international, investment bank of these five countries,” is the main item on the agenda.
He said that the countries would sign a deal at the summit to study the creation of the bank.
Sudhir Vyas, a senior Indian foreign ministry official, told reporters on Monday that the BRICS would have to determine how the bank would be structured and capitalised. Such an ambitious project would take time, he said.
“We don’t set up a bank every ordinary day,” he said.
Pimentel said the proposed bank did not mean “abandoning multilateral mechanisms” such as the World Bank (WB) and the InterAmerican Development Bank (IDB) but was a response to today’s economic necessities.
The WB and the IDB “have specific functions which they fulfill well, such as providing financing for low-income countries” but the current needs go well beyond this, Pimentel said.
A benchmark equity index derivative shared by the stock exchanges of the five BRICS nations is also to be launched on Friday, the exchanges said earlier this month.
They would be cross-listed, so can be bought in local currencies.
The leaders are also expected to sign agreements allowing their individual development banks to extend credit to other members in local currency, a step towards replacing the dollar as the main unit of trade between them.
The five members now account for roughly 18 per cent of the world’s GDP, 15 per cent of global trade and hold 40 per cent of global currency reserves. They account for the 40 per cent of the world population.