BRICS set to endorse reserves pool, development bank

Leaders from Brazil, Russia, India, China and South Africa (BRICS) are expected to endorse plans for a common foreign exchange reserve pool and an infrastructure bank when they meet in Durban, South Africa, on 26-27 March.

BRICS, which represent world's leading emerging economies, will discuss reports prepared by working groups led by Brazil on the proposed reserves pool, and another by India and South Africa on the creation of a joint development bank.

BRICS officials said the reports are expected to be positive on the foreign exchange reserve and the bank, recommending them as "viable and feasible" for the leaders to go ahead with the plan.

Although there are still some differences among the countries, a senior Brazilian government official said, he expected BRICS to give the green light to both projects.

He said the proposals stem from frustration among emerging market economies that rely on the World Bank and International Monetary Fund for funds, which essentially serve the interests of the United States and other western countries.

BRICS countries had, at the first meeting of their respective development banks, in Brazil in April 2010, had signed a cooperation agreement for the creation of a foreign exchange reserves pool and an infrastructure bank for developing countries.

The idea of the BRICS foreign exchange pool and development bank, mainly funded by the BRICS countries was first mooted by India. The plan was to recycle surpluses into investment in developing countries for infrastructure and sustainable development projects.

ExIm (Export Import) Bank represented India in the BRICS process, which laid the foundation of BRICS inter-bank cooperation mechanism.

BRICS development banks followed up the pact by signing a framework agreement on 'financial cooperation within the BRICS inter-bank cooperation mechanism'.

The framework agreement envisaged grant of credits in local currencies and cooperation in capital markets and other financial services, including access to capital and financial markets and treasury transactions in member countries and issuing local currency bonds in BRICS markets.

Development banks are now pursuing the cooperation further. The pooling of central bank reserves would be available to emerging economies for addressing balance of payments problems or for stabilising economies during periods of global financial crises.