The leaders of the BRICS (Brazil, Russia, India, China and South Africa) group of influential emerging economies have agreed to create a US$100-billion pool of currency reserves to serve as a buffer against financial shocks.
South Africa, being the smallest of the five economies, will contribute $5-billion (R51-billion) to the contingency reserve arrangement, as it is known, which will help BRICS member countries to fund current account deficits, among other things.
China will contribute the lion’s share of the fund – $41-billion – while Brazil, Russia and India will each contribute $18-billion.
The five BRICS leaders, including South African President Jacob Zuma, met briefly in St Petersburg, Russia on Thursday on the sidelines of the G20 summit, saying in a statement after their meeting that they had noted “the continued slow pace of the recovery, high unemployment in some countries, and ongoing challenges and vulnerabilities in the global economy, particularly in advanced economies”.
The leaders said they believed “that major economies, including the G20, could do more to boost global demand and market confidence”.
The leaders reiterated concerns expressed at the BRICS summit in Durban in March over the negative spill-over effects of the unconventional monetary policies of certain developed economies.
They emphasised “that the eventual normalisation of monetary policies need to be effectively and carefully calibrated and clearly communicated”.
At the same time, the BRICS leaders also expressed their concern with the stalling of the International Monetary Fund (IMF) reform process, calling once more for the implementation of the 2010 IMF Quota and Governance Reform and the completion the next general quota review by January 2014, as agreed at the G20 summit in Seoul.
The leaders said “good progress” had been made towards the establishment of a BRICS development bank and contingency reserve fund, and “tangible results” were expected by the time of next year’s BRICS summit.
The bank, which will have an initial subscribed capital of $50-billion from the five BRICS countries, is expected to help fund infrastructure projects crucial for development in BRICS member countries.
Progress has been made in negotiating the new development bank’s capital structure, membership, shareholding and governance of the bank, the leaders said.
On the contingency reserve arrangement, consensus has been reached on a number of key aspects and operational details.
“As agreed in Durban, the CRA will have an initial size of US$100-billion,” the leaders’ joint statement read. “Countries’ individual commitments to the CRA will be as follows: China – $41-billion; Brazil, India, and Russia – $18-billion each; and South Africa – $5-billion.”