Hope of new financial institutions at BRICS summit

The good news emanating from the processes leading up to next week’s summit is that the BRICS members will have equal stake in their Bank. Each country will contribute $2 billion to the paid-up capital, while the initial capital would be $50 billion. There are indications that the authorized capital of the BRICS Bank would be $100 billion. Further, there are suggestions that other countries can also hold stocks in this institution, but their combined share should not exceed 45% of the total.

These suggestions regarding the ownership of the BRICS Bank suggest that the bank could well reach out to other partner countries in the developing world. This would be a welcome augury for it opens the door for the group’s members to explore ways in which they can coordinate their development partnership efforts. At present, all the members of the group are engaged in development partnership projects in several parts of the world, and in several countries, more than one BRICS member is present.

The CRA is a very timely initiative by the BRICS to devise their own “banker of last resort”. IMF was the only agency that provided this facility, until ASEAN+3 (ASEAN together with Japan, China and the Republic of Korea) formed the Chiang Mai Initiative Multilateralism (CMIM) in 2010. CMIM began with commitment funds of $120 billion, which was increased to $240 billion in 2012. The stabilization-fund of the BRICS looks similar to CMIM in terms its size. It has proposed an initial stock of $100 billion, with China expected to contribute $ 41 billion. India, Brazil and Russia are expected to have equal contribution of $18 billion, and South Africa would contribute the remaining $5 billion.

With the groundwork for establishing the two institutions having been made, leaders’ endorsement in the Brasilia Summit would usher in a new phase of cooperation between the BRICS nations.

The author is a professor at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University.