New Delhi: The BRICS grouping of five emerging economic powerhouses – Brazil, Russia, India, China and South Africa – Thursday signed two pacts to spur trade in their local currencies and agreed on a joint working group to set up a development bank that will raise their economic weight globally.
Prime Minister Manmohan Singh, Chinese President Hu Jintao, Russian President Dmitry Medvedev, Brazilian President Dilma Rousseff and South African President Jacob Zuma concluded their fourth BRICS summit by renewing the pitch for reforming global governance and closer coordination on global issues.
The development banks of the five countries signed a master agreement on extending credit facilities in the local currency and the BRICS multilateral letter of credit confirmation facility agreement in the presence of their leaders at the Taj Palace Hotel here.
The participating banks include the Export Import Bank of India, Banco Nacional de Desenvolimento Economico e Social (BNDES) of Brazil, State Corporation Bank for Development and Foreign Economic Affairs of Russia, China Development Bank and Development Bank of South Africa.
The master agreement is aimed at reducing the demand for fully convertible currencies for transactions among BRICS nations, and thereby help reducing the transaction costs of intra-BRICS trade.
The confirmation facility pact envisages confirmation of lines of credit on receipt of a request from the exporter, the exporter’s bank or the importer’s bank.
The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, it remains much below the potential of the five economic powerhouses. BRICS has set a target of $500 billion by 2015.
The pacts were finalized after a meeting of trade ministers of the five countries Wednesday.
In an important step that promises to integrate the BRICS economies closely, the five countries considered the possibility of setting up a new development bank.
The bank is being envisaged to mobilise “resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development”, said the BRICS’ Delhi Declaration.
The leaders directed their finance ministers “to examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us by the next summit”, said the declaration.
The BRICS report on synergies and complementarities between the economies of the five countries, a reference guide for promoting trade and investment, was also released in the presence of the leaders. The report has been prepared by a multinational group of experts led by Kaushik Basu, chief economic advisor to the Indian finance ministry.