BRICS nations have decided to establish a new development bank to finance infrastructure projects and to create a $100 billion contingency fund to tackle any financial crisis in emerging economies, in what is seen as a major win for
India's campaign to reform global financial architecture.
The decision was taken at the BRICS Summit in Durban which also launched a Business Council to encourage investment and trade in member countries and to expand business cooperation.
"Following the report from our finance ministers, we are satisfied that the establishment of a New Development Bank is feasible and viable. We have agreed to establish the New Development Bank. The initial contribution to the Bank should be substantial and sufficient for the Bank to be effective in financing infrastructure," the 'eThekwini' (Durban) Declaration said at the end the Summit of leaders of the five countries (Brazil, Russia, India, China and South Africa).
However, the leaders did not decide on the
capital for the proposed bank leaving it to the finance ministers to negotiate this and other issues before September.
The statement also said the initial contribution to the bank should be substantial and sufficient for it to be effective in funding infrastructure.
"We considered that developing countries face challenges of infrastructure development due to insufficient
long-term financing and foreign direct investment, especially investment in capital stock. This constrains global aggregate demand. BRICS cooperation towards more productive use of global financial resources can make a positive contribution to addressing this problem," the BRICS leaders, including Prime Minister Manmohan Singh said in a statement after the two-hour summit.
The development bank, mooted by India at the last year's Summit in Delhi, was originally proposed to be started with a capital of $50 billion with $10 billion from each of the members.
Incidentally, differences appear unresolved with reservations from South Africa and Brazil over the contribution.
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