The New Development Bank: “Shaping a New Era for Global Development”
The potential importance of the New Development Bank (NDB), that is, the bank founded by the BRICS in 2014-2015, can hardly be overstated, at a time when the trans-Atlantic financial system and its institutions have proven themselves unable and unwilling to finance real development and to work for the general welfare. That reality is increasingly clear in the Global South.
Since its founding, it has granted loans worth, cumulatively, $33 billion for more than 96 projects in its five founding-member countries. That has been helpful, but is, in part, a conservative lending profile for a bank with an initial subscribed capital of $50 billion. The new president of the NDB, former Brazilian President Dilma Rousseff, has indicated that she would like to change that.
At this year’s annual meeting of the Board of Governors, May 30-31 in Shanghai, on the theme “Shaping a New Era for Global Development”, she noted that as a former President of a developing country, “I know how important multilateral banks are, and above all, I know the immense challenge of obtaining financing on the scale required to meet the economic, social, logistical, and environmental challenges of these countries.” She has already set as a priority to lend and to trade in local currencies: “Currently, local-currency financing represents approximately 22% of the Bank’s portfolio, largely driven by renminbi-denominated loans. For the 2022-2026 strategic cycle, our goal is that 30% of the Bank’s project financing volume will be denominated in the national currencies of our members.”
As EIR economics editor Paul Gallagher wrote for the website of Russia’s National Committee for BRICS Research: “While the amounts into which this translates make it a small step, it is nonetheless important in that the NDB’s practice in its eight years has been to lend with borrowed capital from international markets (thus in dollars); instead, to lend in BRICS national or other “local” currencies means that additional paid-in capital should come into the bank from the participating nations. This will expand its credit capacity as well.”
In addition to the five BRICS members, Bangladesh, the United Arab Emirates and Egypt have joined the NDB, and Uruguay is about to be admitted. Moreover, at this year’s meeting, Argentina’s Finance Minister Sergio Massa was a special guest. To his surprise, Dilma Rousseff announced to him that the Board of Governors had agreed to vote at its next meeting in early August, in South Africa, on whether to accept Argentina as a new member of the Bank. The petition for Argentina to join, she said, will be “proposed and defended expressly by Brazil,” whose President Lula da Silva has spent the last few months trying to find ways to help Argentina obtain funding to survive its grave financial crisis, and thus escape the stranglehold of the International Monetary Fund.
Sergio Massa had been exploring mechanisms by which the NDB might be able to extend loans to his country as a non-member, but as Dilma Rousseff pointed out, it makes more sense to concentrate on getting accepted as a member in order to have full access to potential funding.