The BRICS – Brazil, Russia, India, China and South Africa- have agreed to establish a new development bank on their 6th summit staged in Durban, South Africa, on March 27, 2013. There are speculations that 50 billion dollar will be injected in to the new bank as an initial capital. The five countries will contribute equal amount. Following this announcement economists around the world have been contemplating what it will mean to the global order.
“The World Bank (WB) and the International Monetary Fund (IMF) are dominated by the western countries with especial focus on developed economies,” says Syed Hassa (PhD), head of the Department of Economics at Addis Abeba University. What the developing economies were able to get from these institutions was unsatisfactory, according to the economist.
The growing influence of the BRICS suggests the inevitable shift of the center of gravity of the global geo-economic power. “The establishment of the bank means more development partners for developing economies, and At least it would provide poor nations like Ethiopia another option of source of finance for their development projects” Syed told EBR. This will help strengthen the level of development in regions like Africa, according to analysts.
Another feature of this development will be the policy freedom that developing countries will be able to enjoy unlike what they are forced to go through to access loans from the existing institutions. “But this does not mean the new bank will have no requirements at all, though it is expected to be less restrictive than those of the WB and IMF,” contends Seyd. “The new bank, for example, may prefer to teach governments on policy issues or hold a serious of discussions before partnering with them. And this again will have an impact on the already existing approaches that ‘the historical development partners’ of the region are using: they may be forced to be more flexible and accommodating, Seyd told EBR.
BRIC is an acronym first coined by a Goldman Sachs economist in 2003; the acronym was changed into BRICS after South Africa joined the block in 2010. BRICS countries constitute 40 Pctof the world’s population and 25 Pctof world’s GDP.