World Economy

BRICS Bank to Lend $2.5b Next Year

Narendra Modi (R) welcomes Xi JinpingNarendra Modi (R) welcomes Xi Jinping

The leaders of five of the world’s rising powers ended a two-day summit Sunday with a pledge to speed global economic recovery as well as fight terrorism and extremism, forces that they said pose a threat to regional and international peace and stability.

The development bank set up by the BRICS group of emerging economies will ramp up lending to $2.5 billion next year after making its first loans to back green projects, its president K.V. Kamath told Reuters.

The BRICS—Brazil, Russia, India, China and South Africa—agreed to create the New Development Bank in July 2014 with initial authorized capital of $100 billion. The lender was officially launched a year later.

“The second year is scaling up, concentrating on people, getting all the skill-sets in,” said Kamath, a veteran Indian banker appointed as the first head of the Shanghai-based NDB. He was speaking on the fringes of a weekend BRICS summit hosted in the Indian resort of Goa by Prime Minister Narendra Modi.

“The fact is that these countries, collectively, have for the last few years contributed to more than 50% of incremental economic wealth that has been generated globally,” said Kamath. “I don’t see that changing.”

The bank has already approved loans totaling $900 million to green projects in each member state. It has also started a renminbi-denominated borrowing program, issuing a three billion yuan ($450 million) bond.

Kamath, 68, said there was plenty of room for new lenders like the NDB and the Chinese-led Asian Infrastructure Investment Bank, in addition to established institutions like the World Bank.

“Infrastructure alone has needs globally of $1-1.5 trillion a year—all the multilateral banks put together can do maybe 15% of this,” said Kamath, who ran India’s ICICI Bank Ltd from 1996 until 2009. “The phrase I would like to use is cooperate and work together, rather than compete. I don’t see competition as a key challenge in this context.”

China’s President Xi Jinping warned Sunday that the global economy remained in a precarious condition as leaders of the BRICS group of nations tried to find ways to fire up growth in the troubled bloc, Livemint reported.

Speaking at the summit in Goa, Xi told his host Narendra Modi and the leaders of Russia, Brazil and South Africa that the club of emerging powers had been undermined by both domestic and international woes.

He said the long-term forecast for BRICS members was positive as he called for more confidence-building measures. “The global economy is still going through a treacherous recovery,” Xi said.

“Because of the impact of both internal and external factors, BRICS countries have somewhat slowed down in economic growth and have faced a number of new challenges in development,” he said.

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