The five-nation grouping of Brazil,Russia,India,China and South Africa (BRICS) today took the first step towards promoting trade in the local currency,and agreed to work towards creating a new development bank on the lines of the World Bank.
The development banks of the five countries signed a master agreement on extending credit in the local currency and the BRICS multi-lateral letter of credit confirmation facility agreement. The master agreement aims to reduce the demand for fully convertible currencies for transactions among BRICS nations,reducing transaction costs of intra-BRICS trade.
The agreements signed today… will boost trade by offering credit in our local currency, Prime Minister Manmohan Singh said in a statement after meeting with Chinese President Hu Jintao,Russian President Dmitry Medvedev,Brazilian President Dilma Rousseff and South African President Jacob Zuma.
The pacts are expected to scale up intra-BRICS trade,which has been growing at the rate of 28 per cent over the last few years,but at $230 billion,remains much below the potential of the five economic powerhouses. BRICS has set a target of $500 billion by 2015.
On the development bank,the leaders directed their finance ministers to set up a joint working group for further study,and report back to us by the next summit.
The bank is being envisaged to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries,said the BRICS Delhi Declaration.
The joint declaration said,…it is critical for advanced economies to adopt responsible macro-economic and financial policies,avoid creating excessive global liquidity and undertake structural reforms to lift growth.