Leaders of the BRICS nations – Brazil, Russia, India,
China, and South Africa – will launch their long-awaited development
bank at a summit next week and decide whether the headquarters should be
in Shanghai or New Delhi, Anton Siluanov, Russian finance minister,
said on Wednesday.
The BRICS’ creation of a $100 billion
bank to finance infrastructure projects has been slow in coming, with
disagreements over its funding, management and headquarters.
“The (headquarters) issue will be decided
on the level of the heads of the countries,” Siluanov told journalists,
adding that the choice was between China’s Shanghai and India’s New
Delhi. BRICS leaders will meet on July 15 – 16 in the Brazilian coastal
city of Fortaleza.
The launch of the bank will be the
group’s first major achievement after struggling to take coordinated
action following an exodus of capital from emerging markets last year,
triggered by the scaling back of US monetary stimulus.
The new bank will symbolise the growing
influence of the BRICS, something that Russia has hoped for after the
West imposed sanctions on Moscow in the spring for annexing part of
Ukraine and its continued involvement in the country’s crisis.
Capitalisation of the new bank has been a
major sticking point, but Siluanov confirmed that the funding would be
divided equally, with an initial total of $10 billion in cash over seven
years and $40bn in guarantees.
The $50 billion will be eventually built up to $100 billion, and the bank will be able to start lending in 2016, he said.
The bank was first proposed in 2012. The
proposal was approved last year at a BRICS summit in South Africa but
failed to be launched during the meeting in Russia last autumn of the
Group of 20 developed and developing nations.
The bank will be open to other countries
that are United Nations members, but the BRICS share is never to decline
below 55 percent, Siluanov said.
The chair, with a term of five years,
will rotate among the members, but the first chairperson is yet to be
decided, Siluanov said.
The heads of the BRICS will also sign a
blueprint agreement on the group’s other project – a $100 billion fund
to steady the currency markets, which has also been off to a slow start.
The initiative became more acutely needed
after an inflow of cheap dollars fuelled a boom in the BRICS for a
decade and then reversed to a sharp outflow last year.
“We have reached an agreement that, in
current conditions of capital volatility, it is important for our
countries to have this buffer in addition to the International Monetary
Fund,” Siluanov said.
China, holder of the world’s largest
foreign exchange reserves, will contribute the bulk of the contingency
currency pool, or $41 billion.
Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.
“It is to be a mechanism that could react swiftly to capital outflow by offering swap operations in dollars,” Siluanov said.
If a need arises, China will be eligible
to ask for half of its contribution, South Africa for double and the
remaining countries the amount they put in.
“Some countries may put in less, but their needs are also greater, proportionally,” Siluanov said.
A BRICS member would be able to
immediately get 30 percent of its eligible share and the remaining 70
percent only with a stabilisation programme from the IMF, Siluanov said.
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