• The BRICS Summit 2013: key asks and priorities

    Historically, international financial institutions developed as a result of the dominance of a few advanced economies, after the Second World War. Until quite recently, the status quo remained largely unchallenged.

The BRICS Development Bank

The idea of establishing a dedicated BRICS Development Bank needs to be seen against the backdrop of continued demand exerted by its member nations to reform the international financial institutions and global financial architecture. The credibility and legitimacy of existing international financial institutions are continuously questioned by the BRICS countries when demands for governance reforms in the form of greater representation and change in voting shares are not met.

Furthermore, in the wake of the recent global financial crisis, the BRICS countries demonstrated their financial clout by pledging $75 billion as its contribution to the IMF’s bailout fund (2012). China contributed $43 billion, whereas India, Russia and Brazil contributed $10 billion each. South Africa brought an additional $2 billion to the bailout table. With this increased financial clout running on surplus foreign exchange and sustained domestic growth, the idea of establishing the BRICS’ own development bank gained currency as a counter to the governance deficit in the international financial system.

A few fundamental questions yet to be answered are the location of the secretariat (physical/virtual), the subscription amount ($10 billion each/contribution on the basis of the size of the economy), control and ownership (opening up to other advanced economies/ exclusive control by the BRICS countries), the geographical mandate of investments (within the BRICS confederation/beyond the BRICS confederation) and finally, the lending practices (divergence from/compliance with lending practices of other multilateral development banks such as the World Bank and regional development banks.

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