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

In US, Still No Decision in Racially-charged Case

Missouri town, many Americans on edge over whether jurors will indict white police officer in August shooting death of unarmed black teen More

Corruption Fighters Want More From World’s Strongest Nations

Anti-corruption activists say final communique fell short of expectations and failed to fully address systemic problems More

Philippines Leery of Development on Reef Reclamation in S. China Sea

Chinese land reclamation projects in area have been ongoing for years, but new satellite imagery reportedly shows China’s massive construction project More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine Marks Anniversary of Deadly 1930s Faminei
X
Daniel Schearf
November 23, 2014 4:32 PM
During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video Law Enforcement, Activists in Ferguson Agree to Keep Peace

Authorities in Ferguson, Missouri, say they have agreed with protest leaders to maintain peace when a grand jury reaches its decision on whether to indict a white police officer in the shooting death of a black teenager. Ferguson, a suburb of St. Louis, has been the scene of intermittent violence since the August 9 shooting intensified long-simmering antagonism between the police and the African-American community. VOA's Zlatica Hoke reports.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8050
JPY
USD
117.90
GBP
USD
0.6376
CAD
USD
1.1259
INR
USD
61.655

Rates may not be current.