Source: VOA
The BRICS member-countries have come close to establishing a reserve bank which will operate as a stabilization fund, Chinese Finance Minister Chen Zhu Guangyao said. Should such a fund be set up, it will prove helpful in restricting the dollar’s influence on the developing countries’ economies, experts say.
The BRICS member-countries have come close to establishing a reserve bank which will operate as a stabilization fund, Chinese Finance Minister Chen Zhu Guangyao said. Should such a fund be set up, it will prove helpful in restricting the dollar’s influence on the developing countries’ economies, experts say.
Brazil
came up with the initiative to set up a reserve bank in 2012. A
relevant agreement was signed in March this year. The joint fund of the
BRICS member-states is meant for offering support to the countries
united in the BRICS Group in case their economic indices start to
deteriorate. Such help would be welcome now more than ever. After the
reports of the US Federal Reserve System about a possible reduction of
the quantitative easing (QE) programme, the fall of the developing
countries’ national currencies started. Since May this year the gold and
hard currency reserves of the developing countries have decreased by
more than 80 billion dollars. This forced the central banks of the BRICS
member-states to work out programmes aimed at saving national
currencies. Brazil alone has allocated 60 billion dollars for hard
currency interventions in support of its national currency – the real.
Uniting their efforts, the BRICS nations will be able to help their
national currencies to become less dependent on the dollar, Deputy
Director of the “Centre of Development” Institute (the Higher School of
Economics)Valery Mironov says:
“The
fall of the developing countries’ national currencies, including the
BRICS member-states, has become a serious problem for the majority of
them. The idea of establishing a reserve fund by the BRICS nations is in
harmony with the agreements which were reached this spring. It was
exactly at that time that the initiative to create a certain alternative
to the World Bank (WB) and to the International Monetary Fund (IMF) was
discussed. It is a good idea, taking into account that a new wave of
currency instability on the developing countries’ markets is
inevitable”.
The
BRICS nations have agreed to create a reserve fund worth 100 billion
dollars. China will allocate 41 billion dollars, Russia, India and
Brazil – 18 billion dollars each, and South Africa – another 5 billion
dollars. This money will be used for crediting countries, which need
financial help, which, in its turn, will enable them to improve their
macroeconomic indices. Another goal here is to carry out the financing
of investment, innovative and infrastructure projects. And one more
circumstance of importance here : finances will be offered not only to
the BRICS member-states but will also be used to offer support to
projects in the other developing countries. Now the BRICS Business
Council is working out normative documents and relevant mechanisms.
Russia’s Finance Ministry believes that the drafting of these documents
will require another six months. And the ratification will also take
time. The reserve bank will be able to select and to finance its first
project only in 2015. Besides, the BRICS countries will have to reach
agreement involving decision making and the size of financial help,
President of the Association of Russian Banks Garegin Tosunyan says:
“The
reserve bank of the BRICS member – countries will operate like similar
international agencies. The new bank will be regarded as a response to
the position taken by the US Federal Reserve System and the European
Central Bank (ECB), which have refused to take on a responsibility for
non-residents, which are using both the dollar and the euro”.
In
the future the reserve bank will be open to other participants,
including new countries and international financial agencies. Very soon
the BRICS Group will pass from the current development model based on
the inflow of investments to the development model based on the boost of
technologies. And the reserve bank is expected to be of help here.
Besides, as a result, investors will have more trust in the developing
economies, and the influence of the developing countries on world
economy will grow.
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