|Follow us on:|
Lawmakers from all five countries have now ratified their participation in the agreement.
China will provide the bulk of the funding with $41 billion, Brazil, Russia and India with $18 billion each, and South Africa with $5 billion.
“The agreement aims to provide temporary resources to BRICS members facing pressure in their balance of payments. This instrument will contribute to promoting international financial stability, as it will complement the current global network of financial protection,” the Brazilian Foreign Ministry said in a statement.
“It will also reinforce the world’s economic and financial agents’ trust and mitigate the risk of contagion from eventual shocks which may come to affect the economies of the bloc,” it said.
Last year, during its sixth summit in Brazil, BRICS announced the creation of the BRICS Development Bank and of the BRICS Contingency Reserve Arrangement (CRA).
“The establishment of a self-managed contingent reserve arrangement would have a positive precautionary effect, help BRICS countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability,” South African President Jacob Zuma said earlier.
The CRA is meant to provide an alternative to International Monetary Fund’s emergency lending. In the CRA, emergency loans of up to 30 per cent of a member nation’s contribution will be decided by a simple majority. Bigger loans will require the consent of all CRA members.
Meanwhile, the $100 billion development bank, funded by BRICS countries, will offer loans to other middle- and low-income countries.
Membership of the BRICS Bank will be open to all members of the United Nations, subject to agreement from the bank’s board of governors, China’s Vice Finance Minister Shi Yaobin said last month.
“The establishment of the BRICS bank is a landmark event in financial cooperation, which will promote the BRICS countries and other emerging markets, and infrastructure construction and sustainable development in developing countries,” said Yaobin.
“The promotion of reform in global economic governance has important and far-reaching significance,” he added.
As the BRICS countries prepare to launch new financial institutions like the $100 billion BRICS Bank, the China-led Asia Infrastructure Investment Bank, and a $100 billion BRICS currency reserve fund, the IMF has once again delayed voting reforms to give emerging countries greater say.
BRICS leaders Vladimir Putin, Xi Jinping, Jacob Zuma, Narendra Modi and Dilma Rousseff are meeting next week in the Russian city of Ufa for the 7th BRICS Summit.