Emerging Market Nations to Launch Bank and Reserve Pool
BRICS emerging market nations is planning to launch a US$100 billion development bank and currency reserve pool in Brazil their first solid step in reshaping the western dominated international financial system. The New Development Bank is targeted to fund infrastructure projects in several developing nations that are based in Shanghai with India presiding over its operations for the first five years, and then followed by Brazil and Russia. A US$ 100 billion currency reserve pool will also be established to help countries forestall short term liquidity pressures.
This will be the first major achievement of the BRICS (Brazil, Russia, India, China and South Africa) countries since they got together last 2009 to establish a bigger voice in the global financial order that was created by Western powers after World War II snd is now centered on the International Monetary Fund and World Bank. The new bank will reflect the growing influence of the BRICS that accounts for half of the world’s population and one fifth of the global economic output.
The bank will start with a subscribed capital of around US$50 billion which will be divided equally between the five founders giving them an initial total of US$ 10 billion in cash for the next seven years and about US$40 billion in guarantees. Lending will begin in 2016 and is open to membership by other countries, but the capital shares should not drop down 55 percent.
Contingency pool is held in the reserves of each of the BRICS country and can be shifted to another member to balance out payment difficulties. This initiative will build momentum once the reverse in flows of cheap cash will fuel the boom in emerging markets for the next decade.