BRICS leaders agree to establish development bank

The 5th BRICS summit ended Wednesday with leaders agreeing to establish a development bank, while several agreements were signed to strengthen cooperation within the grouping and enhance engagement with other emerging and developing economies.

New BRICS chairperson and South African President Jacob Zuma told a media briefing early Wednesday afternoon that following a report from the finance ministers, the leaders were satisfied that the establishment of the bank was feasible and viable.

This was after the consideration that developing countries faced challenges of infrastructure development due to insufficient long-term financing and direct investment, especially in capital stock, and constrained aggregate demand.

As a result, there was need for BRICS cooperation towards more productive use of global financial resources to make a positive contribution to the process.

"We have agreed to establish the new development bank. The initial capital contributions for the bank should be substantial and sufficient for the bank to be effective in financing infrastructure," he said.

The development bank would be based on the needs of the BRICS countries which require about 4.5 trillion U.S. dollars over the next five years for infrastructural development, he said.

Zuma added that BRICS leaders had also in June 2012 tasked finance ministers and central bank governors to explore the construction of a financial safety net leading to the creation of a Contingent Reserve Arrangement (CRA) within BRICS countries.

Leaders agreed that the creation of the CRA with an initial size of 100 billion U.S. dollars was also viable subject to internal legal frameworks and appropriate safeguards.

"We direct our finance ministers and central bank governors to continue working towards its establishment. We are grateful to our

finance ministers and central bank governors for the work undertaken on the new development bank and contingent reserve arrangement.

"We direct them to negotiate and conclude the agreement which will establish them. We will review progress made in these two initiatives at our net meeting in September 2013," he said.

Agreements signed during the summit included one on green economy cooperation co-financing and another on infrastructure co- financing for Africa.

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