BRICS agrees to create development bank

BRICS leaders have agreed to form a development bank parallel to World Bank and IMF, to help any financial crisis and fund their USD 4.5 trillion infrastructure plans.

Brazil, Russia, India, China and South Africa – world top five most emerging economic powers have come together in Durban, South Africa and discussed their economical development plans at the BRICS summit.

“Following the report from our finance ministers, we are satisfied that the establishment of a New Development Bank is feasible and viable. We have agreed to establish the New Development Bank. The initial contribution to the Bank should be substantial and sufficient for the Bank to be effective in financing infrastructure,” the Declaration said.

“We considered that developing countries face challenges of infrastructure development due to insufficient long-term financing and foreign direct investment, especially investment in capital stock. This constrains global aggregate demand. BRICS cooperation towards more productive use of global financial resources can make a positive contribution to addressing this problem,” the BRICS leaders said in a statement.

While BRICS have agreed to form a development bank however there are some doubts on the dominancy of China, the world’s second largest economy. There are also some “different views” on the basic issues such as capital funding, feasibility, country specific foreign policies and different economies.

“Russia supports the creation of this financial institution. We believe that, if it is created, then it must work on market principles only and support the businesses of all our countries,” President Vladimir Putin said.

“We are not contesting the idea, we support it, we favor it, but we are urging everyone to be serious enough to make further efforts in order to create the right foundation. The devil is in the details,” Russia’s deputy foreign minister, Sergey A. Ryabkov told.

South African President Jacob Zuma who is hopeful to form BRICS development bank, said that “based on our own considerable infrastructure needs, which amount to about USD 4.5 trillion US dollars over the next five years.”

Brazil’s President Dilma Rousseff said, Even the most skeptical voices do recognize the contribution the BRICS bloc of countries has provided in the field of international economics.”

Indian Prime Minister Manmohan Singh had campaigned for long for reform in global financial architecture.

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