BRICS to establish $100 billion development bank and contingency reserve fund
BRICS group of nations inked a pact to set up a new $100 billion development bank and emergency reserve fund. The agreement to create the bank was signed during the 6th BRICS Summit being held in Fortaleza, Brazil. BRICS group includes Brazil, Russia, India, China and South Africa.
To begin with, the bank will start operating with $50 billion in initial capital with the five BRICS contributing $10 billion each.
According to the pact, the capital of the bank will be divided equally among the five participating nations and the headquarters of the same will be in Shanghai, China. The chairmanship of the bank will be rotational and its first President will come from India for the first 6 years. The Bank will also have a regional office in Johannesburg, South Africa.
The governing body of the bank will be formed by BRICS Finance ministers or central banks’ governors to manage the CRA. The BRICS CRA will not be open to outsiders. Initially, the bank will focus on infrastructure projects in the BRICS countries.
Capital contribution from BRICS nations
- China: $41 billion
- Brazil, Russia and India: $18 billion each
- South Africa: $5 billion
Future benefits of BRICS Development Bank:
The creation of the $100 billion development bank will help the developing countries to:
- Effectively deal with short term liquidity pressures
- Encourage further BRICS cooperation
- Complement existing international arrangements
- Consolidate the global financial safety net