BRICS nations likely to announce setting up of $100-billion fund at fifth summit in Brazil

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The BRICS nations are likely to formally announce the setting up of a $100-billion fund, which will help member countries tide over a current account deficit crisis, at their fifth summit next week in Brazil.

China will be the largest donor to this fund and is expected to contribute around $41 billion. India, Russia and Brazil will contribute $18 billion each with South Africa bringing in the remaining $5 billion. Typically, these contributions are in the form of commitments and no actual fund flow happens until the money is required.

Russian President Vladimir Putin had last year spoken about creating a $100-billion fund to steady currency markets at a meeting of BRICS leaders. This fund is in addition to the development bank, the other important part of the evolving BRICS financial architecture, which is expected to be formally launched through a treaty next week in Brazil.

“The fund, dubbed the Contingent Reserve Arrangement, is aimed to provide member countries with an emergency cushion of cash during times of crisis,” said an official.He added that the creation of this fund would reduce the reliance of emerging economies on the IMF and other multilateral institutions that are still dominated by the developed world. The US has not yet ratified a proposal that would give more powers to emerging economies in the IMF.

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