On July 15, 2014, the BRICS countries (Brazil, Russia, India, China, and South Africa) signed an agreement to establish the New Development Bank (NDB). This bank, also known as the BRICS Bank, was created to serve as an alternative to the existing financial institutions, such as the International Monetary Fund (IMF) and the World Bank.
The establishment of this bank was seen as a significant milestone in the efforts of developing countries to have a greater say in the international financial system. It was also seen as a way to improve the infrastructure and economic development of the BRICS countries and other developing nations.
The NDB is headquartered in Shanghai, China, and has a current authorized capital of $100 billion. Of this amount, each of the five member countries has contributed $10 billion. The bank`s main objective is to finance infrastructure and sustainable development projects in the BRICS countries and beyond.
One of the advantages of the NDB is that it allows developing nations to have more control over their own development. This is because the bank`s borrowers are also its owners, unlike the IMF and World Bank, where developed nations have more influence over the lending decisions and policy-setting.
Another advantage of the NDB is that it provides an alternative source of funding for developing countries. Many developing nations have been critical of the IMF and World Bank`s conditionalities for loans, which often come with policy reforms that may not be in the best interest of the borrowing country. The NDB`s lending is expected to be more flexible and tailored to the specific needs of the borrower.
The establishment of the NDB is also seen as a way to reduce the dominance of the US dollar in the international financial system. Traditionally, the IMF and World Bank have operated in US dollars, but the NDB plans to issue bonds denominated in member countries` currencies.
The NDB`s first loan was approved in 2016 for a renewable energy project in India. Since then, it has approved loans for several other projects, such as a water infrastructure project in Russia and a transport infrastructure project in Brazil.
In conclusion, the establishment of the NDB by the BRICS countries was a significant development in the efforts of developing nations to have a greater say in the international financial system. The bank`s main objective of financing infrastructure and sustainable development projects in the BRICS countries and beyond provides an alternative source of funding for developing nations, which is more flexible and tailored to their specific needs. The NDB is a welcome addition to the global financial system and may serve as a model for other developing nations looking to have more control over their own development.