Fortaleza, July 16 – In a major victory for India at international forum, the BRICS Summit on Tuesday night agreed to establish the new development bank, a point New Delhi emphasised to prevent by domination by anyone of the members. The bank will be started with an initial size of 100 billion dollars for which the initial subscribed capital will be equally shared by the founding members.
The agreement on establishing the bank and a contingency reserve arrangement with an initial size of 100 billion dollars came at a Summit meeting of the five-nation grouping in which Prime Minister Narendra Modi launched his first multilateral engagement with global leaders.
The bank will have an initial authorised capital of USD 100 billion. The initial subscribed capital shall be of USD 50 billion to be equally shared by the founding-members.
China won the race for getting the bank’s headquarters in Shanghai even as India also made a pitch for its location in New Delhi. India will be the first President of the bank while the first chair of the Board of Governors will be from Russia.
The new development bank’s Africa regional centre will be established in South Africa and currently with the headquarters. “We direct our Finance Ministers to work out the modalities for its operationalisation,” the leaders said in the Fortaleza Declaration adopted at the Summit.
India’s insistence on the equal sharing of the initial subscribed capital was based on the premise that BRICS bank should not fall into the practices of the Bretton Woods institutions like the IMF and the World Bank dominated by the United States.
Hailing the establishment of the bank and the CRA, Modi said in the plenary session that the bank would now benefit not only the member-nations but also the developing world.
The two institutions would now be a new instrument of safeguarding the economic stability in the context of the great international financial volatility. He said there was a great need for reforms of the UN Security Council and international financial institutions to reflect the ground realities and to create a new financial architecture.
Noting that it is his first BRICS Summit, Modi said he looks forward to working with the leaders and building from personal bonds in the days to come. He said BRICS entered the second cycle of Summits today at a time when instabilty is growing in many regions. For a climate of peace and stability, it calls for newer levels of cooperation, he said.
“I believe for the first time an institution like BRICS brings together a group of nations on the basis of future potential rather than existing prosperity. The very idea is forward-looking. BRICS must provide a united, clear basis for a peaceful and stable world”, the Prime Minister said.
Modi said that along with the reform of the UNSC and internataional financial organizatgions, the WTO regime should also be reformed so that an open trading regime is necessary for a strong global trading arrangement that must address the aspirations of the developing world.
The agreement on the new development and the CRA was signed by ministers from five countries, including Minister of State for Finance Nirmala Sitharaman in the presence of Modi and Presidents of China, Russia, South Africa and host Brazil.
The Declaration said BRICS as well as other emerging markets and developing countries continue to face significant financing constraints to address infrastructure gaps and sustainable development needs.
It is in this backdrop that one has to seed the signing of the agreement for establishing the new development bank for mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies, it said.
Based on sound banking principles, the Declaration said the bank will strengthen cooperation among BRICS countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus “contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth”.
It said the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US
100 billion will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.
The agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures, according to the Declaration.
The BRICS also signed a Memorandum of Understanding on Cooperation among BRICS Export Credit and Guarantees Agencies that will improve the support environment for increasing trade opportunities among the member-countries.
“We appreciate the progress our Development Banks have made in enhancing and strengthening the financial ties among BRICS countries. Given the importance of adopting innovation initiatives, we welcome the conclusion of the Cooperation Agreement on Innovation within the BRICS Interbank Cooperation Mechanism”, said the Declaration.
Pointing to the potential for BRICS insurance and reinsurance markets to pool capacities, the Summit directed the relevant authorities to explore avenues of cooperation in this regard, said the Declaration.
-INDIA TODAY
