The BRICS group of emerging economies will contribute $100 billion to a fighting fund to steady currency markets destabilised by an expected pullback of US monetary stimulus, Russian President Vladimir Putin said on Thursday.
But it will be much smaller than the $240 billion originally envisaged. “The initiative to establish a BRICS currency reserve pool is at its final stage,” Putin said at meeting of BRICS leaders during the G20 summit. “Its capital volume has been agreed at $100 billion.” At the meeting of BRICS leaders, China committed $41 billion; Brazil, India and Russia $18 billion each; and South Africa $5 billion.
Meanwhile, the nation facing the biggest financial shock, India, received scant sympathy from China and Russia as both called for policy action to tackle external deficits.
“We see the temporary difficulties of some BRICS countries, mainly as difficulties in terms of international balance of payments,” said Chinese Vice Finance Minister Zhu Guangyao. “The policy options in response to such ... difficulties include increasing interest rates or devaluing currencies.”
Asked about the Indian statement, South African Finance Minister Pravin Gordhan said this week: “We don’t know what the proposal is ... This is India’s initiative to resolve India’s issues.”
The BRICS group, after a meeting of their leaders issued a statement calling on the G20 to ensure that any changes in monetary policy are well flagged. “The eventual normalisation of monetary policies needs to be effectively and carefully calibrated and clearly communicated.”
The statement reflects concerns over the prospect that the US Federal Reserve will scale back its ultra-loose monetary policy.
‘No timeline for setting up fund’
St Petersburg: China will contribute the lion’s share of the $100 billion currency reserve fund, to be set up by the BRICS nations to fight currency shocks, in the event of an early taper of stimulus by the US Federal Reserve, no timelines have been set by which the fund will be in place, Sujatha Singh, foreign secretary, said on Thursday. “Several aspects remain be finalised,
so there can be no timelines,”
she said. Shobhana Subramanian