By Li Hongmei
The BRICS group of emerging economies will contribute US$100 billion to a fighting fund to steady currency markets destabilized by an expected pullback of US monetary stimulus, Russian President Vladimir Putin said yesterday.
The term BRICS refers to Brazil, Russia, India, China and South Africa.
China, holder of the world's largest foreign exchange reserves, will contribute US$41 billion of the currency pool; Brazil, India and Russia US$18 billion each; and South Africa US$5 billion.
"The initiative to establish a BRICS currency reserve pool is at its final stage," Putin said in opening remarks to a meeting of BRICS leaders during a Group of 20 summit in Russia's second city, St Petersburg.
Russian Deputy Finance Minister Sergei Storchak said details still needed to be worked out, suggesting that much more work would need to be done on the reserve facility.
A joint BRICS development bank, with capital of up to US$50 billion, is also still months away from realization amid disagreements over burden sharing and where it should be based.
"We have asked not to create unnecessary expectations," Storchak said regarding the currency pool. "Politically, the countries are ready, but technically they are not."
Last year's original initiative foresaw creating a pool of central bank funds available to BRICS facing balance of payments difficulties. There was also a push to create an IMF-style credit line to insure against external shocks.
China said yesterday that there is currently no need to draw up bailout packages for emerging countries hit by capital outflows and currency devaluations, but urged rapid reforms of their economies.
Chinese Vice Finance Minister Zhu Guangyao told reporters at the G20 meeting that the economic fundamentals of these countries remain sound and that they have the means to handle the problem themselves.
And while he acknowledged that reasons for the current economic problems faced by the so-called BRICS leading emerging economies are external, he also said internal structural problems were at the origin of the strains. "Therefore we think that currently all BRICS countries do not need special bailout plans but economic structural reforms are necessary," he said.
