Friday, 17 May 2013

India and other BRICS countries endorses joint reserves pool for BRICS nation banks

Leaders from the world's major emerging economies are likely to endorse plans at a summit next week to create a joint foreign exchange reserves pool and an infrastructure bank for developing countries, senior emerging market officials said on Thursday.

Leaders from China, Russia, India, Brazil and South Africa, known as the BRICS,
 will gather in the coastal city of Durban, South Africa, on March 26 and 27.
The officials said the leaders will discuss reports prepared by working groups
led by Brazil on the proposed reserves pool, and another by India and
South Africa on the creation of a joint development bank, which would
 provide financing to emerging and developing economies for
infrastructure projects.
The reports are expected to say the bank and the reserves fund are
 "viable and feasible" and recommend to leaders to give the
go-ahead, according to the officials.
"There are still some differences among the countries, but we
believe that the BRICS will give the green light to both projects,"
 said a senior Brazilian government official, who asked not to
be named because he was not authorized to speak about
the matters publicly.
The proposals reflect frustration among emerging market nations
at having to rely on the World Bank and International Monetary
 Fund, which they see as still reflecting the interests of the United
States and other industrialized countries.
The official told Reuters the proposed contingency reserve
arrangement would initially hold between $90 billion and
$120 billion, although a figure was unlikely to be included
 in a final statement by the leaders.
The pool of central bank money would be available to emerging
economies facing balance of payments difficulties or could be
 tapped to stabilize economies during periods of global
financial crises, according to documents outlining the plan.
Officials have said that the reserve pool should be similar in
 size to the Chiang Mai Initiative of southeast Asian countries,
which was doubled to $240 billion in May to boost their
protection against external shocks.
One senior emerging market official said the reserve pool
 could eventually be larger than the Chiang Mai Initiative,
 which includes China and Japan. China has emphasized that
the size of the BRICS contingency pool needs to be big enough
to make an impression on financial markets.
Another senior emerging market official said BRICS countries
were also considering injecting an initial $50 billion into the
new infrastructure bank. Details on the scale, location and
structure of the bank will be discussed, but not agreed
at the summit, the official added.
The bank would support the ever-growing financing needs in
 emerging and developing nations for roads, modern-day
 port facilities, reliable power and rail services.
While the proposed $50 billion is small compared to the huge
 infrastructure needs of developing countries, it is larger
than the $29.1 billion the World Bank committed in 2010
to infrastructure development in developing countries.
Countries like China have invested heavily in infrastructure,
 but poorer ones in South Asia and Africa have struggled to
 finance new infrastructure projects.
"As for a development bank, we are on the threshold of taking
 an official decision on this issue," Russian Deputy
Foreign Minister Sergei Ryabkov told reporters in Moscow
on Thursday. "There are only a few days
 left (until the summit), and complete clarity
will be introduced," he added.
The Africa Development Bank has estimated Africa can
become a middle-income region if it spends
about $90 billion a year on infrastructure.
The World Bank has a slightly higher estimate.

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