Russia approves creation of BRICS foreign exchange fund

American control is coming apart fast.

This is a big deal not to be missed as the BRICS do what they set out to do.

The new BRICS fund will have $100 billion, though it is formed only by five countries. 
Source: Alamy / Legion Media

The Russian Government has approved a draft agreement on the creation of a $100 billion fund by Brazil, Russia, India, China, and South Africa to steady currency markets.

Russia and India Report
By Alexei Lossan
7 July 2014

The Russian Government signed a draft agreement on the creation of a $100 billion pool of currency reserves that the BRICS countries are forming to guard against financial shocks. According to the document, the countries’ dollar reserves will remain on the balance sheets of their central banks. However, these reserves can be made available at the request of one of the parties.

Vasily Yakimkin, a senior lecturer at the Russian Presidential Academy of National Economy and Public Administration (RANEPA), says two substructures are being created under the project. The stabilisation fund with capital of $100 billion would be a direct competitor with the IMF. China would contribute $41 billion, Brazil, Russia and India, $18 billion each and South Africa $5 billion. The second substructure would be a new development bank will come into being with a start-up capital of $50 billion, with each country contributing $10 billion. “As expected, the agreements on the creation of these structures will soon be signed at the summit of the heads of the BRICS countries in Brazil on July 15,” Yamikin says. “The structures will start functioning starting in 2015.” He adds that each of the BRICS countries wants to host the headquarters of the new institution.

Yakimkin says that the development bank will fund various institutional or infrastructural projects in other countries, notably in Africa. The new currency fund will be a “mutual aid fund” to be used in case one of the BRICS countries encounters any financial problems. Russia, India, and Brazil can count on a loan equal to their contribution to the pool, while, as a rule, China’s access to the liquidity is limited to half of its share. “This project will significantly reduce the future volatility of the currency markets of developing countries, which several months ago endured a serious downturn while the IMF did not help,” says Yakimkin. The fall of the BRICS countries’ currencies began in summer 2013 when the Brazilian real and Russian rouble dropped to their four year lows in relation to the dollar and the Indian rupee tumbled to a historic low.

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