News / Economy

BRICS Bank Viewed as IMF Competitor

FILE - Leaders of the BRICS and South American nations pose for a group photo at the BRICS summit at Itamaraty palace in Brasilia, Brazil, July 16, 2014.
FILE - Leaders of the BRICS and South American nations pose for a group photo at the BRICS summit at Itamaraty palace in Brasilia, Brazil, July 16, 2014.
Shannon Van Sant

In July, nations known as the “BRICS,” Brazil, Russia, India, China and South Africa, announced the creation of a new, $100 billion development bank (NDB). The project is aimed at lending money to developing nations for investments, much like how the American and European-backed International Monetary Fund (IMF) and World Bank operate.

Liu Haifang, a professor at Peking University’s Center for African Studies, said the bank will provide developing countries with more options for financing.

“Finally they got some alternative sources to get funding for infrastructure and they do not come with these conditionalities. So it for me is very symbolic in terms of political meaning, it means the whole world order is not unipolar. It is not a west centered world. It is a multipolar world.  African countries trying to get funding do not have to only follow the rules of the developed world,” said Liu Haifang.

The “rules of the developed world” Liu refered to are the conditions that the IMF sets forth in exchange for access to loans. Instead of putting up collateral, governments must follow economic policies prescribed by the IMF.

BRICS nations have 40 percent of the world’s population and 20 percent of global economic output. However, they have been blocked from gaining greater voting rights at the IMF, largely because of opposition in the U.S. Congress.

Some observers see the new bank as a competitor to the IMF and World Bank that will provide funds to developing countries to build infrastructure and shore up their economies to better handle crises.

Reserve fund

The BRICS nations also plan to establish a reserve fund to which China will make the biggest contribution -- $41 billion. Matt Ferchen of the Carnegie Tsinghua Center for Global Policy said the fund is a concrete form of multi-lateral cooperation and despite China’s growing economic power, it wants to be seen as an egalitarian player in the bank’s establishment and financing decisions.

“China has this rhetoric in terms of its foreign policy and especially as it relates to China’s engagement with other developing countries, that China won’t interfere in other countries’ domestic politics, that China respects the domestic, economic and political systems of other countries, in a way that they want to be seen as different from the World Bank, the IMF, or countries like the United States,” noted Ferchen.

The New Development Bank is expected to be based in Shanghai and have an Indian citizen as its first chief executive. Skeptics say the bank faces challenges over whether the creditor nations will use the institution to promote their own national interests.

But with China's growing economic might, many expect it could become a powerful international force. It could also help promote other currencies, such as China's yuan, as an alternative to the present global finance system, dominated by the U.S. dollar.

Sanctions workaround

Akshay Mathur, Head of Research and Geoeconomics Fellow at Gateway House, said the new bank could help developing powers get around sanctions imposed by the West.

“When more and more geopolitical events take place, such as, Iran, or Ukraine, and you know, the more dollars in use, the more control the U.S. has over the financial architecture. But in a multi-currency architecture the U.S. will lose that grip and other countries will remain in control of their currency so that can continue to conduct trade without being sanctioned,” Mathur explained.

Parts of the new bank still must be approved by local legislatures. Officials say they hope to make the first loan in 2016.

You May Like

Video VOA EXCLUSIVE: Iraq President Vows to Fight IS 'Until They Are Killed or We Die'

In wide-ranging interview with VOA Persian service reporter, Fuad Masum describes conflict as new type of fight that will take time to win More

Video Russian Anti-Corruption Campaigner Slams Putin’s Crackdown on Dissent

In interview with VOA Alexei Navalny says he believes new law against 'undesirable NGOs' part of move to keep Russian president in power More

Video On The Scene: In Ethiopia, 'Are You a Journalist?' Is a Loaded Question

VOA's Anita Powell describes the difficulties faced by reporters in fully conveying the story in a country where people are reticent to share their true opinions More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Expelled from Pakistan, Afghan Refugees Return to Increased Hardshipi
X
Ayesha Tanzeem
May 28, 2015 6:48 PM
Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Expelled from Pakistan, Afghan Refugees Return to Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video Floodwaters Recede in Houston, but Rain Continues

Many parts of Texas are recovering from one of the worst natural disasters to hit the southwestern state. Heavy rains on Monday and early Tuesday caused rivers to swell in eastern and central Texas, washing away homes and killing at least 13 people. As VOA’s Greg Flakus reports from Houston, floodwaters are receding slowly in the country's fourth-largest city, and there likely is to be more rain in the coming days.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.

VOA Blogs

World Currencies

EUR
USD
0.9205
JPY
USD
123.69
GBP
USD
0.6508
CAD
USD
1.2456
INR
USD
64.051

Rates may not be current.