The BRICS Bank Pursues a New Financial Architecture

The New Development Bank (NDB) held its annual Board of Governors meeting in Cape Town, South Africa, Aug. 29-31. The main mission of the bank, founded in 2015 by the five member countries of the BRICS, is to mobilize financial resources for projects in emerging economies and developing countries. One of the main obstacles to doing so, as NDB President Dilma Rousseff pointed out, is the overindebtedness of the current financial system, including in the most developed countries. However, in developing nations, the debt is “growing too much and too fast”, and has become “an excessive burden”. Therefore, she insisted: “systemic changes, especially in the international financial architecture, are urgently needed”.

As we recently reported, developing countries are now spending close to 42% of their budgets merely on servicing their debt, mainly as a result of a brutally unjust dollar-based financial system (cf. SAS 32-33/24). They are particularly vulnerable to upheavals in the financial markets and to interest rate fluctuations. Two measures to alleviate the situation were proposed by Dilma Rousseff, one being to reduce the burden of high interest rates, and the other to increase financing in local currencies. In fact, the NDB’s objective is to provide up to 30% of its financing in the local currencies of the borrowing countries, to facilitate new investments and increase predictability.

More importantly though, she noted that “sustainable economic development requires also an industrial basis and capacity in science, technology and innovation that contribute to an expansion of productivity and better jobs”. This emphasis on increasing productivity through science and innovation holds the key to rapid economic advancement—far more than merely transitioning to trade in national currencies.

Russian Deputy Finance Minister Ivan Chebeskov, who attended the meeting, confirmed that “the need to transform and modify the existing financial system” was discussed, and is a priority for Russia, which holds the presidency of the BRICS this year. The subject will certainly be on the agenda of the BRICS meeting in Kazan (Russia) on Oct. 22-24.

At this year’s annual meeting, Algeria’s membership in the NDB was approved by the Board of Governors. In addition to the five original members of the bank (Brazil, Russia, India, China, South Africa), Bangladesh, Egypt, and the United Arab Emirates later joined.