BRIC alliance will attempt to set up a new international financial institution.
The western finance crisis has spurred BRIC-building, with the fast-growing economies of Russia, Brazil, India and China (BRIC) stepping up efforts to formalise their four-way club.
The Finance Ministers of the BRIC nations would meet later this year for the first time to discuss the setting up of a new international financial institution, it was announced in Moscow this week.
The agreement was reached by the leaders of the BRIC countries at their meeting on the sidelines of the G8 summit in Japan last month, Russia’s Deputy Finance Minister Dmitry Pankin told the press in Moscow.
The new body is conceived as an alternative to the outdated financial institutions, he said.
“The post-World War II financial structures, such as the International Monetary Fund and the World Bank are not working efficiently,” Mr. Pankin said. “It is necessary to look for alternative instruments or modify the existing ones so that they reflect the new multipolar world.”
Moscow voiced disappointment over G8’s failure to initiate reform of the international financial institutions.
“Prior to the Hokkaido summit the expectation was that G8 would come up with a new vision for the future global financial system and international institutions regulating global finances. However, this did not happen,” the Russian minister said.
He added that the coming meeting of the BRIC Finance Ministers would give a start to an “interesting dialogue.”
The meeting will mark another step towards institutionalisation of the BRIC forum set up in Yekaterinburg, Russia, in May, when the Foreign Ministers of the four nations held their first stand-alone meeting. The foreign ministers called for closer interaction of the financial institutions of their countries to cope with the current crisis.
The BRIC counties are already in consultation over the global financial crisis, according to Bank of Russia Chairman Sergei Ignatiyev.
“We are closely interacting. The central bank chiefs of BRIC country hold regular consultations in Swiss Basel every two months, besides bilateral visits,” Mr. Ignatiyev said last month.
The current financial crisis allows the four BRIC countries to increase their share of the world economy even faster than originally forecast.
In 2007 the International Monetary Fund estimated that the combined gross domestic product of the BRIC accounted for 12 per cent of global growth, up from 8 per cent in 2000. Today the BRIC economics are collectively 16 per cent of global GDP, founder of the BRIC concept, Jim O’Neill of the Goldman Sachs said at the St. Petersburg Economic Forum last month.
Moscow has taken the lead in building the BRIC alliance, as President Dmitry Medvedev and his predecessor-turned Prime Minister Vladimir Putin both want Russia to play a central role in modernising the international financial infrastructure.
After taking office on May 7 Mr. Medvedev said Russia was “a global player” with the capabilities and resources to “take part in setting new rules of the game in the global economy.”
Mr. Medvedev also promised to turn Moscow into a major international financial centre, and to make the rouble into a regional hard currency in the near future as part of efforts to overhaul of the international financial architecture, doing away with the domination of the United States and EU and increasing the role of big developing economies.
In a speech at the St. Petersburg Forum the Russian leader put the blame for the global financial crisis squarely on the United States. He said “aggressive financial policies” of the world’s biggest economy, whose role in the international economic system no longer matched its actual capabilities, was one of the principal underlying causes of the worst global crisis since the Great Depression of the 1930s.
Mr. Medvedev’s plan calls for streamlining the international financial institutions so that their work in different financial markets is better coordinated and reflects the interests of more countries; better regulation of financial markets, and creation of a basket of reserve currencies, including the rouble.
At the Yekaterinburg meeting the BRIC nations stated their resolve to push for reforms at the IMF, World Bank, WTO, and United Nations. As the West shows little interest in meeting their demands the BRIC members are taking steps to create alternative multilateral organisations to challenge the dominance of the existing world policy forums.