BRICS countries challenge IMF, World Bank
The long awaited event has happened.
Five developing countries, Brazil, Russia, India, China and South Africa, also called BRICS have challenged the IMF and World Bank.
At the annual summit at Brazil’s Fortaleza city, the BRICS countries stated they have founded a multilateral development bank.
The shortly named the New Development Bank’s (NDB) capital is $50 billion for now.
The NDB will be financing infrastructure projects that come from developing countries. The first president will be from India, while Brazil and Russia will be responsible for choosing the senior directors.
The headquarters of the bank will be located in Shanghai, China. BRICS countries also took a step toward establishing a reserve currency fund worth $100 billion to evade any potential move coming from the Federal Reserve Bank.The country that contributed most to the fund is China with $41 billion.
According to economists, BRICS are sending a very clear message to the west, especially to the U.S. that:
“Despite of our strong stance in the global economy we do not have enough right of speech in the eyes of the IMF and the World Bank; therefore, we will establish a new global finance system.”
But will this new undertaking by the BRICS countries, whose leaders posed happily together for the cameras after the announcement of the establishment, be successful?
There are economists who have skeptical approaches toward the new initiative and there are ones that are looking at it with hope. The skeptics’ reasons are very different. According to some, different views, growth rates, political establishments and population structures might block the way of BRICS countries on reaching a consensus.
It is also being speculated that, the BRICS countries want the NDB for rather different purposes than those of each other.
For example, it is claimed that Russia and Brazil have different expectations from this enterprise.
For Russia, it is a way of fighting against the U.S. after the sanctions that have been imposed on them, because of the Ukraine conflicts and a way of battling against the dominancy of the dollar.
But on the other hand, for Brazil and India rather than a tool for breaking the dominancy of the dollar, it is a tool to build their infrastructures faster.
According to the economists, Russia’s demand to break the dominancy of the dollar is not something that will work well with China.
China does not have any problems with the financial system that is being guided by the U.S.
But what about Turkey’s situation?
Once upon a time, Turkey was mentioned as a country that could join the BRICS, but recently it is being mentioned in the MINT (Mexico, Indonesia, Nigeria and Turkey) group, which was suggested by the father of the BRICS, economist Jim O’Neill
We cannot know if MINT in the upcoming years can stand up against organizations such as the World Bank and the IMF, but after the announcement made by the minister of treasury, Turkey seems to be close to the Western institutions.
According to the announcement, Turkey has won the right of having a seat in the executive board for the first time.
In that case, did we end up on opposite sides with BRICS countries?