WASHINGTON/BRASILIA (Reuters) - Leaders from the world’s major emerging economies are likely to endorse plans at a summit next week to create a joint foreign exchange reserves pool and an infrastructure bank for developing countries, senior emerging market officials said on Thursday.
Leaders from China, Russia, India, Brazil and South Africa, known as the BRICS, will gather in the coastal city of Durban, South Africa, on March 26 and 27.
The officials said the leaders will discuss reports prepared by working groups led by Brazil on the proposed reserves pool, and another by India and South Africa on the creation of a joint development bank, which would provide financing to emerging and developing economies for infrastructure projects.
The reports are expected to say the bank and the reserves fund are “viable and feasible” and recommend to leaders to give the go-ahead, according to the officials.
“There are still some differences among the countries, but we believe that the BRICS will give the green light to both projects,” said a senior Brazilian government official, who asked not to be named because he was not authorized to speak about the matters publicly.
The proposals reflect frustration among emerging market nations at having to rely on the World Bank and International Monetary Fund, which they see as still reflecting the interests of the United States and other industrialized countries.
The official told Reuters the proposed contingency reserve arrangement would initially hold between $90 billion and $120 billion, although a figure was unlikely to be included in a final statement by the leaders.
The pool of central bank money would be available to emerging economies facing balance of payments difficulties or could be tapped to stabilize economies during periods of global financial crises, according to documents outlining the plan.
Officials have said that the reserve pool should be similar in size to the Chiang Mai Initiative of southeast Asian countries, which was doubled to $240 billion in May to boost their protection against external shocks.
One senior emerging market official said the reserve pool could eventually be larger than the Chiang Mai Initiative, which includes China and Japan. China has emphasized that the size of the BRICS contingency pool needs to be big enough to make an impression on financial markets.
Another senior emerging market official said BRICS countries were also considering injecting an initial $50 billion into the new infrastructure bank. Details on the scale, location and structure of the bank will be discussed, but not agreed at the summit, the official added.
The bank would support the ever-growing financing needs in emerging and developing nations for roads, modern-day port facilities, reliable power and rail services.
While the proposed $50 billion is small compared to the huge infrastructure needs of developing countries, it is larger than the $29.1 billion the World Bank committed in 2010 to infrastructure development in developing countries.
Countries like China have invested heavily in infrastructure, but poorer ones in South Asia and Africa have struggled to finance new infrastructure projects.
“As for a development bank, we are on the threshold of taking an official decision on this issue,” Russian Deputy Foreign Minister Sergei Ryabkov told reporters in Moscow on Thursday. “There are only a few days left (until the summit), and complete clarity will be introduced,” he added.
The Africa Development Bank has estimated Africa can become a middle-income region if it spends about $90 billion a year on infrastructure. The World Bank has a slightly higher estimate.
Additional reporting by Steve Gutterman in Moscow. Reporting by Lesley Wroughton in Washington and Alonso Soto in Brasilia; Editing by James Dalgleish, Tim Ahmann and Chris Reese