IMF welcomes establishment of BRICS bank

The International Monetary Fund has welcomed the move to set up a new BRICS development bank stating that it is ready to work with the Bank’s leadership. “I would like to congratulate you on hosting a successful meeting of the BRICS leaders in Fortaleza, Brazil, and especially on establishing the Contingent Reserve Arrangement,” IMF Managing Director Christine Lagarde said in a message conveyed to the Brazilian President Dilma Rousseff.

IMF staff would be delighted to work with the BRICS team dedicated to this project with a view to reinforcing the cooperation among all parts of the international safety net intended to preserve financial stability in the world, she said.

“The IMF has a very strong relationship with all the BRICS nations, which are key members of this institution. We look forward to further strengthening our collaboration,” she added. Meanwhile, the US refrained from making any comment on the move to set up the development bank aimed at reshaping the international financial system dominated by the West, saying that the details are yet to emerge.

“They (BRICS leaders) made an announcement about the plan for the creation of a BRICS development bank. There are not a lot of details about the specific focus that this planned development bank would play – or what the specific focus it would have. Many of the important details, including its governance and any relationships with the established international financial institutions aren’t clear yet.

So we’ll wait to see what more details emerge,” State Department Spokesperson Jen Psaki said. “I don’t think we’ve seen the details of how it’s modeled and obviously, it has to serve a particular role and needs to these countries that works with the other financial institutions that are out there internationally,” Psaki said while replying to the question whether the Obama administration would be fine if BRICS bank is modelled after the World Bank.

BRICS bank to get going in 2-yrs; India to head for 6 yrs

India will have the Presidency of the BRICS’ USD 100 billion New Development Bank for six years with headquarters in China that will become operational in about two years, a major step for reshaping the international financial system dominated by the West.

India’s presidency will be followed by Brazil and Russia who will have five years term each under an agreement reached after intense negotiations among the five country-grouping BRICS -Brazil, Russia, India, China and South Africa.

The announcement about the bank and a USD 100 billion Currency Reserve Arrangement (CRA) that will help countries to deal with short-term liquidity pressures, was made last night at the conclusion of the VIth BRICS Summit here attended by Prime Minister Narendra Modi, Presidents Vladimir Putin of Russia, Xi Jinping of China, Jacob Zuma of South Africa and Dilma Rousseff of Brazil.

Indian officials said a period of six months had been provided for ratification of the agreement by respective Parliaments of the member-nations except in the case of India where no Parliamentary endorsement was required.

The member- countries have six months thereafter, to pay the first of the seven instalments. Given this time frame, the bank is expected to get going in about two years, officials said. For CRA, China will contribute maximum at USD 41 billion followed by India, Russia, Brazil with USD 18 billion each and South Africa with USD five billion to have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation as also strengthen the global financial safety net.

Announcing the setting up of the bank with headquarters in Shanghai, Dilma said, “It will help contain the volatility faced by diverse economies as a result of the tapering of the United States’ policy of monetary expansion.” “It is a sign of the times, which demand reform of the IMF,” she told reporters at the close of the summit.

Thoughts for a Day

16th July’14 FII’s & DII’s Activity

Updated : 06.07pm / 16th July’14

Chidambaram welcomes setting up of $100 bn BRICS Bank

Welcoming setting up of the BRICS Bank , former Finance Minister P Chidambaram today said the work initiated by United Progressive Alliance (UPA) government last year has led to its culmination in Brazil yesterday.

“I am delighted that the work begun by the UPA government at the BRICS Summit in South Africa has culminated in an agreement to set up the New Development Bank,” he said in a statement

. Finance Minister of the BRICS countries had also worked on the idea at various deliberations on the sidelines of the Fund-Bank and G-20 meetings, he said. Yesterday, the member countries of BRICS nations – Brazil, Russia, India, China and South Africa – agreed to set up the USD 100 billion bank to help development of member nations and developing countries.

“I am especially happy that all outstanding issues have been resolved to the mutual satisfaction of the five countries. All five countries will contribute equal amount to the equity capital of the bank and will have equal voice and equal voting rights as founder members of the bank,” he said.

The bank will be headquartered at Shanghai and India’s candidate will be the first president of the bank, he said. “I congratulate the government of the BRICS countries as well as the chief negotiators on the successful conclusion of the negotiations. The BRICS Bank is an outcome of which every Indian can be legitimately proud,” he said.