BRICS agree on development bank structure

The BRICS partners are concerned about the US Federal Reserve’s plans to start tapering its liquidity injection programme. Source: Reuters

The BRICS partners are concerned about the US Federal Reserve’s plans to start tapering its liquidity injection programme. Source: Reuters

Officials from the five countries agreed last month that the bank's capital should come from three payment categories, including subscriptions.

The BRICS (Brazil, Russia, India, China and South Africa) agreed on the structure of a proposed development bank with $50 billion in capital, but the process may take months on account of “difficult” details that need to be ironed out, Reuters reported citing Russia’s Deputy Finance Minister Sergei Storchak.

Officials from the five countries agreed last month that the bank's capital should come from three payment categories, including subscriptions, the news agency cited Storchak as telling journalists.

“We must assume that the bank will not start functioning as fast as one could imagine,” Storchak was cited as saying in the report. “It will take months, maybe a year.”

Division of the capital, payment of the capital, the location of the bank and the bank's management are some of the issues that have to decided, Storchak said, according to the report. “These are systemic themes, complicated, (and) negotiations are difficult,” Reuters quoted the Russian deputy finance minister.

A Brazilian government official directly involved in the negotiations on BRICS development bank told the news agency that members are still discussing how much each country will put in.  Brazil supports the idea of each country contributing $10 billion for the new bank, the official said, according to the report.

“There are some countries that want a different structure,” the anonymous official told the news agency.  “It's not going to be an easy negotiation, we are not there yet.”

Indian officials had already said during the BRICS summit in Durban in March that the country is in favour of the initial capital of $50 billion to launch the fund, with equal contribution of $10 billion from each BRICS country. China, the world’s second largest economy and the BRICS’ largest economy, is believed to be plugging for a $100 billion corpus fund.

The BRICS partners are concerned about the US Federal Reserve’s plans to start tapering its liquidity injection programme. Brazil’s real and India’s rupee (which fell to more than 68 to a dollar last week) weakened the most. Brazil was forced to announce a $60 billion intervention to prop up liquidity. The rupee has lost over 20 percent year to date, the real declined 15.5 percent, South Africa’s rand 18.07 percent, the rouble 3.95 percent.

The leaders of the BRICS states will meet on the sidelines of this week’s G20 summit in St. Petersburg.

Based on materials from Reuters. 

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