The idea of another development bank led by Brazil, Russia, India, China and South Africa has just gained another supporter.
Asian Development Bank President Haruhiko Kuroda said at the recently concluded ADB annual meeting he welcomed the creation of a BRICS development bank. The proposed bank, put forward at the fourth BRICS summit, will specifically cater to developing countries. It was born out of the BRICS’s frustration over multilateral institutions such as the World Bank and the International Monetary Fund, which have always been headed by an American and a European.
The idea has garnered support from experts, who see it as a potential alternative source of funding. Even outgoing World Bank President Robert Zoellick welcomed the creation of a BRICS bank, though with a warning that setting up one is no easy task. But some wonder if it were just a threat to other banks that might never see fruition.
The Delhi Declaration, in which the idea of the bank was included, was bare in terms of details. For one, the document did not indicate a timetable for the bank’s setup or “clues” on what its role will be in the development space, Emerging Markets reports.
But if China, as some experts believe, would be able to use the bank as a gateway to push its official currency, renminbi, as an international reserve currency, plans for a BRICS bank might actually takeoff. China is currently pushing for its currency to be part of the IMF’s “basket of currencies,” Reuters reports.
Stephen Gelb, development economist at the University of Johannesburg in South Africa, said if China wants to use the bank to promote renminbi, it is “more likely” the bank “will happen.”
“[China] won’t see it as just something to talk about,” he said.
A joint working group, set up by BRICS finance ministers, is currently examining the feasibility and viability of the proposed bank. The report is expected at the next BRICS summit in 2013, to be held in South Africa.
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