The BRICS New Development Bank is designed as an alternative and a supplement to existing international “hard currency” financial institutions to help member states finance projects in local currencies, Vladimir Dmitriev, CEO of Vnesheconombank told RT.
The new bank was not intended as a rival and competitor to the existing international institutions, but rather as a useful alternative instrument in order for the BRICS countries to finance their own projects, CEO of Russia’s Vnesheconombank (VEB) told RT on the sidelines of the BRICS/SCO summits in Ufa.
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“The decision was made to create a financial institution which is to support economic development in BRICS countries. I would rather say that it’s a complimentary vehicle to be focused specifically on the development of BRICS countries,” Dmitriev told RT.
“I’m completely convinced that the organization will cooperate with other international financial institutions. The intention is not to create a competitor to those institutions,” he emphasized.
In a similar fashion the plan to use local currencies for mutual settlements among the BRICS countries is offering an alternative to hard currencies, especially in situations when member have limited access to the international capital markets.
“One of the goals of creating the New Development Bank is to create, in parallel with existing hard currencies, the mechanism which will allow our country to finance joint projects in local currencies,” Dmitriev said.
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While the New Development Bank is designed to help finance investment projects and facilitate trade between BRICS countries in local currencies, the nations also established a $100 billion currency reserve pool opportunity to provide each other financial assistance in case of problems with their balance of payments.
The New Development Bank president Kundapur Vaman Kamath confirmed to RT that a “significant part” of the bank’s activity could be carried out in local currencies.
“I have not applied my mind as to what effect it will have on other currencies,” Kamath told RT. “But as far as our local currencies are concerned, our own countries are concerned, that will substantially reduce any exchange risk.”
“I think clearly setting up of this bank is also a signal that developing countries are now able to stand on their feet in their own way and set up their own institutions,” Kamath added. “And we are really looking at expanding the membership base in the future.”