The five BRICS countries that represent the world’s largest emerging markets are in the final stage of signing an important agreement on creation of $100 billion reserve fund. The government of Russia has already approved the draft and is ready to launch this large-scale project aimed at stabilization of forex markets together with Brazil, India, China, and South Africa. The BRICS agreed on creation of a fund with an impressive budget, which will be able to compensate for losses from financial shocks taking place in the member countries. The key condition of the agreement is that the dollar reserves will be kept on the balance sheet of the central bank of each BRICS country. Along with that, if even one nation requires the funds, they are to be allocated.
The new development bank is able to compete with the three world’s major creditors, including the IMF with its $369 billion fund. Nevertheless, one should be sensible of the fact that the BRICS fund is created by only five member countries.
“The decision of the BRICS countries about the creation of a supranational organization analogous to the IMF seems logical and correct. At the moment, the IMF has become something unwieldy and is practically not being reformed”, said Anton Soroko, analyst at FINAM investment company. “The U.S. is blocking the recapitalization of the IMF by developing countries since it risks losing a considerable amount of influence”, he added.
Vasily Yakimkin, Senior Lecturer at the Russian Academy of National Economy and Public Services, said that the IMF delays lending for infrastructural and investment projects in developing countries, while overcharging interest rates.
Thus, a new player arrives in the world arena of powerful creditors, who will pay special attention to the needs of emerging nations.
