At the fifth summit of the five emerging economies in Durban, South Africa, the leaders of Brazil, Russia, India, China and South Africa have agreed — at least in principle — to establish the much-discussed BRICS development bank. Discussion on the finer details, meanwhile, has been left for another day.
The leaders made the decision Wednesday (March 27), following a report from their respective finance ministers, whom they instructed a year ago to explore the feasibility of setting up the bank.
The bank has often been lauded as a rival to the established international financial institutions, such as the World Bank.
But questions such as who will play host to the bank, how much money each of the five countries will provide as seed capital, or how they intend to finance projects remain unanswered.
In a joint statement, the leaders said only that “initial capital contribution to the bank should be substantial and sufficient.”
What has been agreed, however, is that they will establish a contingent reserve fund worth $100 billion, which will act as a financial safety net for the bank. This reserve will be subject to “internal legal frameworks and appropriate safeguards.”
The bank is set to help finance infrastructure and sustainable development projects in BRICS countries, other emerging economies and developing nations. It will, according to the statement, “supplement the existing efforts of multilateral and regional financial institutions for global growth and development.”
But what issues will shape the bank’s formation? Among the reasons for its establishment is to challenge and reform the global financial architecture, which has hitherto been dominated by Western-backed financial institutions.
Oxfam’s Steve Price-Thomas remains cautious, however, asserting that ”the devil is in the detail.”
“If the BRICS bank fights poverty and inequality it could be a big success,” he said. “But if it focuses only on big-ticket schemes that fail to directly benefit poor people it could do more harm than good.”
Further details concerning the bank will be discussed at the leaders’ next meeting in September.
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