M A I N   N E W S

Building a bank, brick by BRICS
Tribune News Service

Durban, March 25
When the five finance ministers of BRICS countries, including India’s P. Chidambaram, meet tomorrow, top among the agenda is giving concrete shape to the idea mooted in the 2012 Delhi summit to establish a development bank on the lines of the World Bank.

At the Delhi summit, a working group was formed to finalise the modalities of the ‘BRICS Bank’, as it has come to be known. The group has held four meetings and its recommendations are to be put up to the finance ministers when they meet in Durban. Official sources said the three major contentious issues that need to be resolved were: how much capital is to be invested, who would be the board members of the bank and how will the bank be governed.

On the question of capital, the amount being proposed is between $50 million and $100 million and there is a discussion on as to whether the five members would put in equal amounts or invest differentially, according to the size of their economy.

Also undecided is whether membership of the board should be restricted to the five BRICS countries or incorporate a few others interested, such as Egypt, which has been pushing for membership of BRICS itself. Russia had reportedly been against bringing Egypt into the fold.

Nor is there consensus over governance issues, including voting rights, lending rates and the kinds of project to be funded. Countries such as China are pushing for voting rights based on the size of investments made by member countries, much like the IMF or World Bank. Another issue is whether the lending rate should be concessional or commercial. Some countries such as India are uncomfortable with concessional lending, as it makes the bank unviable to run after several years.

Another dispute is over whether funds should be extended for infrastructure or social development projects. Discussions are also underway over creating a foreign exchange currency reserve pool to ease the liquidity crisis in developing countries, similar to the role being played by the IMF. There is hope that these and other issues would be sorted out when the finance ministers meet. Even then, the setting up of the bank is expected to happen only after a couple of years.