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BRICS finalises $100bn currency reserve fund
August 28, 2013, 6:22 am

The CRA was announced during the 5th BRICS Summit in Durban earlier in March this year [GCIS]

The CRA was announced during the fifth BRICS Summit in Durban earlier in March this year [GCIS]

Even as currencies in emerging economies are taking a hit with the US Federal Reserve’s policy change announcements, BRICS are close to reaching a consensus on creating a $100 billion foreign currency reserve fund, asserted a top Chinese central bank official.

Yi Gang, Deputy Governor of the People’s Bank of China, held a press briefing in Beijing on Tuesday ahead of the G20 Summit that opens next week in Russia.

Yi said BRICS have agreed on the ratio of contributions, operation mechanisms, governance structure and loan-to-value ratio of a Contingent Reserve Arrangement (CRA).

“We will see the launch of the fund in the foreseeable future,” said Yi.

The CRA was announced during the fifth BRICS Summit in Durban earlier in March this year.

BRICS leaders had agreed to create a pool of reserves to provide financial support to the group’s five member countries in case of need.

The BRICS hold total foreign-currency reserves of $4.4 trillion, $3 trillion of which are held by China alone.

Chinese daily Global Times has quoted Yi on Tuesday as saying that “China will contribute the “biggest share” to the fund, but not exceeding 50 per cent of the total contributions”.

More details are expected to be announced when the BRICS leaders meet on the sidelines of the G20 Summit in Saint Petersburg on September 5-6.

Sanmit Ahuja,  Vice-Chairman of a London-based research study group, Economic Impact Foundation, said this will create an alternate mechanism for the global financial architecture.

“This is the first significant BRICS financial cooperation mechanism and will stand in good stead when a member country faces an economic crisis next. Once the proposed BRICS Bank is set up, it will give an institutional framework to the group,” Ahuja told The BRICS Post.

Meanwhile, Russian organisers of the upcoming Summit have said on Tuesday that spillovers of the US Federal Reserve’s plan to scale back its economic stimulus are expected to feature prominently in discussions during the meet.

“Uncertainties surrounding the US Federal Reserve’s plan to phase out stimulus are also expected to dominate talks at the G20 summit,” said G20 Sherpa Ksenia Yudaeva at a press conference in Moscow.

Russia holds the G20 rotating presidency this year.

The BRICS Post