Global financial institutions must be required to stage a reform if they are to be responsive to the challenges borne by developing countries, president of the host nation of the 15th annual Brics Summit, Cyril Ramaphosa, said on Tuesday.
“We require a fundamental reform of the global financial institutions so that they can be more agile and responsive to the challenges facing developing economies,” he said.
Ramaphosa was speaking in a leader’s address alongside other Brics heads of state at the summit, themed ‘Brics and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development, and Inclusive Multilateralism’.
Read: Brics latest: Reducing dollar reliance tops summit agenda
Global financial institutions such as the European-backed World Bank and the International Monetary Fund (IMF) have often come to the aid of developing countries, but often at a steep cost and with complex conditions attached.
“In this respect, the New Development Bank, established by Brics countries in 2015, is leading the way,” Ramaphosa said.
‘Mobilising resources’
Ramaphosa said that since its formation, the New Development Bank (NDB) or the official Brics bank, has displayed an ability to mobilise resources for infrastructure and sustainable development in emerging economies and without conditionalities.
The bank has been in existence for nearly a decade. It was formed with the intention of providing financing to developing nations for much-needed infrastructure projects that in turn stoke economic growth. It has been viewed as an alternative to the likes of the IMF.
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Ramaphosa also emphasised that economic growth must be underpinned by inclusiveness.
‘Driving force’
The Brics nations – Brazil, Russia, India, China and South Africa – have seen foreign investment into their bloc grow fourfold over the past 20 years. They contribute 32% to the world’s GDP and aim to reach 50% by 2030.
In contrast, the GDP contribution of the G7 nations – Canada, France, Germany, Italy, Japan, the UK and the US – has dropped to 30.7% and has effectively been strong-armed by Brics.
Speaking about the Brics bloc outpacing the G7, Brazilian President Luiz Inácio Lula da Silva said developing nations will be the driving force of global economic growth in coming years.
“We have surpassed the G7 in purchasing power parity, indicating that emerging and developing markets are the ones that will show the highest growth rate in the coming years.”
He lamented the unmet financial needs of developing nations, which he said remain due to a lack of substantial reform from traditional financial institutions, adding that the Brics bank must be a global leader in financing projects that address the most pressing challenges currently.
Surprise attendee
Russian President Vladimir Putin, who was uninvited to the summit on the back of a warrant of arrest that was issued against him by the International Criminal Court, made a surprise virtual appearance.
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Putin said Brics, which has “already become a credible alternative to existing Western development institutions”, has a major role to play in ‘de-dollarising’ the economic ties of the trade bloc.
The five nations are seeking to introduce a common currency that would see them lessen their reliance on the dominant dollar.
“The objectives and irreversible process of the de-dollarisation of our economic ties is gaining pace.
“We are working to fine-tune mechanisms [for] mutual settlements … and financial control,” said Putin.
He noted that the share of US dollar export and input operations within Brics has been declining, reaching 28.7% last year.
“In fact, this summit is to discuss the detail [of] the entire range of issues related to the transition to national currencies in all areas of economic cooperation between our five nations,” said Putin.
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