14 April 2011
Brazil, Russia, India, China and South Africa – the BRICS grouping of influential developing countries – have signed an agreement to use their own currencies instead of the predominant US dollar in issuing credit or grants to each other.
The Times of India reported that the first-of-its-kind agreement was signed at the third BRICS Leaders Meeting in Sanya, China on Thursday.
“Our designated banks have signed a framework agreement on financial cooperation which envisages grant of credit in local currencies and cooperation in capital markets and other financial services,” Indian Prime Minister Manmohan Singh said at a news conference with the other BRICS leaders.
According to the The Times of India, the five BRICS economies together hold around 40 percent of the world’s currency reserves, the majority of which is still in US dollars.
The interbank co-operation agreement was signed by Luciano Coutinho, president of Brazil’s development bank BNDES; TCA Ranganathan, president of India’s Exim bank; Vladimir Dmitriev, chairman of Russia’s Vnesheconombank; Gao Jin, deputy president of the China Development Bank; and Jabu Moleketi, chairman of the Development Bank of Southern Africa.
News agency Reuters reported on Thursday that the China Development Bank was ready to pump up to 10-billion yuan of loans into Brazil, Russia, India and South Africa this year.
“Chen Yuan, the bank head, said the yuan loans, as part of the BRICS efforts to reduce the use of US dollar in bilateral trade and investment, would focus on big projects in oil, natural gas and infrastructure fields,” Reuters reported.
The Times of India noted, however, that the agreement was limited to credit, and did not extend to trade.
Reuters also reported that the agreement was an in-principle one, with no discussion of amounts to be loaned or targeted projects, although Chen was quoted as telling reporters on the sidelines of the summit that the focus would be “on existing projects, because it generally takes a few years to prepare for new large projects.”