Russian President Vladimir Putin has ratified a deal to establish a $100 billion foreign currency reserve pool for the BRICS group. The pool’s purpose is to protect national currencies from volatility in global markets.
The document was “to ratify the treaty on the establishment of a pool of foreign exchange reserves of the BRICS.”
On Wednesday the deal was ratified by Russia’s upper house of Parliament, the Federation Council. According to the deputy head of the Federal Council Committee for Budget and Financial Markets, Sergey Ivanov, the currency pool will primarily support the balance of payments of the BRICS member states.
“Realization of the agreement will also contribute to the effective protection of the national currencies against the volatility in the world currency markets,” Ivanov said.
READ MORE: Russian upper house ratifies BRICS $100bn currency pool
The goal of the pool is so that BRICS member states can urgently replenish their liquidity from it in different proportions to resolve problems with their balance of payments.
China will make the biggest contribution to the pool - $41 billion. Russia, Brazil and India will donate $18 billion each, while South Africa’s investment will be $5 billion.
The fund is expected to be maintained by a managing council, a permanent committee and a coordinator who will be from the country of the current president.
In July Russia, Brazil, India, China and South Africa signed the document to a reserve currency pool worth over $100bn as well as $100bn BRICS Development Bank
BRICS represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP, and 30 percent of the world’s GDP based on PPP, a more accurate reading of the real economy. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total.