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A funding alternative?

BEA DOTTIN, [email protected]

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It was an announcement that went virtually unnoticed, given Barbados’ current preoccupation with the controversial municipal solid waste tax.
At their recent annual meeting in Fortaleza, host country Brazil, and the leaders of Russia, India, China, and South Africa, the BRICS, announced the establishment of their New Development Bank, saying its establishment was to challenge the influence of long-standing institutions like the World Bank and International Monetary Fund (IMF).
A statement from the BRICS leaders said the bank will be based in Shanghai, China, and will open with an “initial capitalisation” of $100 billion. They also said its first president would be named by India, while Russia and Brazil would select other top officers.
Members of the five nation grouping also said they would create a $200 billion fund of currency reserves for themselves to use during balance of payments crises.
Brazil president Dilma Rousseff said: “This provides security, a kind of safety net for BRICS countries and others.”
While there is still not much information on the extent to which countries like Barbados would likely benefit from the setting up of this new bank, just the fact that an attempt is being made to shake the IMF and World Bank status quo is worthy of notice.
One challenge that has faced Barbados in the current recession is accessing finance under reasonable terms.
With Barbados having been graduated from World Bank assistance because it is seen as too well off, and with the IMF still seen as a funding source of last resort, officials here would welcome help from an institution that might be viewed as being more sympathetic towards its challenges.
That is partly because some of the BRICS, while large in comparison to Caribbean countries and indeed many international nations, are still considered developing nations. Barbados would also hope that its good relations with China, which is a major influence within the group would help open the door to assistance from the new bank.
All of this is conjecture at the moment since the entire project is in its infancy. What it does show, though, is that the financial crisis and global recession that took the world by surprise in 2008, and from which many countries are still struggling to recover, has been the proverbial wake up call for some governments.
The said, the BRICS getting together and forming a bank is highly unlikely to cause the demise of institutions like the IMF and World Bank. But it should demonstrate to them and others that it can no longer be business as usual. That is a point that should not be lost on Barbados.