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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Secret Service Chief Under Fire for White House Security Breach

Julia Pierson faces tough questions from lawmakers after recent intrusion at White House, says: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.