[hindu]
China will contribute $41 billion, while India will chip in with $18 billion
The BRICS (Brazil, Russia, India, China and South
Africa) group on Thursday made progress in the creation of a
$100-billion Currency Reserve Fund (CRF) by announcing individual
contribution.
China will contribute $41 billion,
while Brazil, Russia and India will chip in with $18 billion each. South
Africa, the smallest economy, will commit only $5 billion to the CRF.
Prime
Minister Manmohan Singh said the development was significant as it came
at a time when emerging market currencies were very vulnerable in
recent months on account of global factors like withdrawal of the easy
money policy by the U.S., whose economy had shown signs of recovery.
The
fund would eventually allow the five nations to access the fund to deal
with short-term volatility in their capital flows, which might
negatively impact their currencies. The idea of such a fund found
traction in the last BRICS summit in Durban, South Africa, earlier this
year.
The BRICS leaders, meeting on the sidelines of
the G-20 meeting on Thursday, said in a joint statement: “In light of
the increase in financial market and capital flow volatility during
recent months, the BRICS leaders reiterated their concerns over the
unintended negative spillovers of unconventional monetary policies of
certain developed economies. They emphasised that the eventual
normalisation of monetary policies needs to be effectively and carefully
calibrated and clearly communicated.”
This implies
that the BRICS nations would want the U.S. to communicate to the
emerging economies how its monetary strategy will pan out over the next
year or so. It is not known how the U.S. would respond to the concerns
expressed by the BRICS economies. There have been news reports, citing
U.S. officials, suggesting that Russia and China may not be in full
agreement with India’s position that the U.S. unconventional monetary
policy needs to be calibrated in the future. However, Foreign Secretary
Sujata Singh said the BRICS position, as reflected in the joint
communiqué, was made in unison, especially with regard to the “spillover
effects of unconventional monetary policies of developed countries.”
In
fact, the BRICS leaders also expressed concern at the stalling of the
International Monetary Fund (IMF) reform process. They recalled the
urgent need to complete the next IMF quota review by January next to
“ensure the Fund’s credibility, legitimacy and effectiveness.”
The
Foreign Secretary said the plan for creating a BRICS Development Bank
with an initial corpus of $50 billion would progress smoothly in the
months to come. “We can’t give any specific timeline, but the BRICS
leaders are committed to working out the details of the bank.”
