BRICS Development Bank On The Cards?

One of the major Asia Pacific daily has come out with a report that the BRICS nations are likely to come out with a development bank in line with the Asian Development Bank or The World Bank. Without naming the source it has been reported that officials from India, Brazil, China, Russia and South Africa agreed to set up the bank with a total capital of USD50 billion, shared equally among them. The decision is taken in the New Delhi at a meeting that took place in the first week of August.

Previously also this kind of proposal have cropped up and China has proposed a total capital of USD 100 billion and sought a bigger role in the bank. But at that point of time disagreements have cropped up. It is being said that this agreement is likely to end such disagreement between the interested parties. The main motto of the bank is to support the financing needs in emerging and developing nations for roads, modern-day port facilities, and reliable power and rail services.

However, there is still cloud over the contribution from respective countries. BRICS aimed to inject an initial USD50 billion into the bank, but there was disagreement over whether each state should contribute $10 billion or if contributions should vary by the size of their economies. China's economy is about 20 times the size of South Africa's and four times as big as Russia's or India's.

The other issues that is cropping up is whether to offer a stake to developed nations. The group is also considering offering a stake of 40-45% to non-BRICS nations. That would help the bank get a higher credit rating and enable it to raise cheaper funds from the market. Those issues are likely to be discussed when finance ministers from the group meet on the sidelines of the annual meetings of the World Bank and International Monetary Fund in Washington in October.

The five countries represent a fifth of global GDP but have struggled to find common ground that would convert their economic weight into joint political clout.