BRICS To Establish Bank To Rival IMF, World Bank
By Bukola Idowu
Brazil, Russia, India, China and South Africa known as BRICS are set to approve the establishment of a developmental bank that will rival the World Bank and the International Monetary Fund (IMF) at their annual summit which began yesterday.
The five nations at the summit which is holding at the eastern South African city of Durban say they plan to set up the institution which would encroach on the roles of the World Bank and the IMF to tackle under-development and currency volatility.
Officials of the five BRICS nations say the leaders would also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.
Brazilian Finance Minister Guido Mantega, told reporters that finance ministers and central bank governors from the BRICS nations, who met in Durban yesterday, agreed to set up currency crisis fund of about $100 billion. He however didn’t give details of proposed funding for the new bank, which Brazil wants established by 2014. The nations’ leaders are due to sign a final accord today.
South African International Relations Minister Maite Nkoana-Mashabane had earlier stated the need for change saying “We need to change the way business is conducted in the international financial institutions. They need to be reformed.”
According to the Chief Executive Officer of Johannesburg-based Frontier Advisory, Martyn Davies, “The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world. There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world.”
Brazil’s real has gained 1.9 percent against the dollar since the beginning of the year, while South Africa’s rand has dropped 8.7 per cent in the period.
For South Africa, which makes up just 2.5 per cent of total gross domestic product in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma has invited 15 African heads of states, including Egypt’s Mohamed Mursi and Ethiopia’s Hailemariam Desalegn, for talks with the BRICS leaders at the summit. For most of the BRICS leaders, it’s also the first opportunity to meet Chinese President Xi Jinping after his appointment on March 17.