BRICS bank to help sustainable development

The New Development Bank (NDB), which was launched by the BRICS group of emerging economies, is expected to fund long-term investment in infrastructure and gear up more sustainable development of member nations and developing countries.The bank with an initial capital of $50bn and set up by the BRICS nations comprising Brazil, Russia, India, China and South Africa, recently announced plans to raise money, both on local markets and internationally.The bank was introduced at an organisational summit of the BRICS countries in the Russian city of Ufa last week.Veteran Indian banker, K V Kamath, 67, the former chief executive of ICICI Bank, India’s largest private lender, was appointed president of Shanghai-based NDB in May this year. The NDB, which the BRICS countries see as an alternative to the World Bank, will have its capital expanded to $100bn within the next two years.It plans to issue first loans, yet to be agreed, in April - a plan Kamath said was on track.Kamath said the NDB would seek international and local agencies ratings - a necessary step for issuing debt.Together, BRICS countries account for 25% of global GDP and 40% of the world’s population.Nobel Prize-winning economist Joseph Stiglitz, a professor at Columbia University and the World Bank’s former chief economist, described the BRICS’ New Development Bank as a significant initiative.“This is adding to the flow of money that will go to finance infrastructure, adaptation to climate change - all the needs that are so evident in the poorest countries. It also reflects a fundamental change in global economic and political power. The BRICS countries today are richer than the advanced countries were when the World Bank and the IMF were founded. We’re in a different world - but the old institutions haven’t kept up.”According to the United Nations Conference on Trade and Development, there had been a “fundamental change in the international economy”, especially so in the last decade.Emerging and developing countries have significantly increased their weight in global GDP and especially in global economic growth; in particular, they have been responsible for most of the growth in the world economy since the 2008 financial crisis.The fact that emerging and developing countries have the necessary savings and foreign exchange reserves to finance a new development bank, which can contribute to finance such investment, seems to make a clear case for the creation of such an institution.Hence, many argue the BRICS Bank would be a complement, not a substitute, for existing financial institutions both in the public and the private sector.Its existence is likely to enhance the voice of developing and emerging economies in the development of the financial architecture, as well as in providing the much needed additional finance.