Brics economies plan $100bn reserves fund

Russian President Vladimir Putin with  China's Xi Jinping Brics leaders are in Russia to take part in the G20 summit in St Petersburg

Related Stories

Leaders of the Brics group of nations - Brazil, Russia, India, China and South Africa - have said they will set up a $100bn (£65bn) fund to guard against financial shocks.

The move comes as emerging economies across the world have been hit by speculation that US may scale back its key economic stimulus programme soon.

That has seen investors pull out money, hurting currencies of emerging nations.

The Brics leaders said the details of the fund were still being worked out.

"The initiative to establish a Brics currency reserve pool is at its final stage," Russian President Vladimir Putin said during the G20 summit in St Petersburg.

"Its capital volume has been agreed at $100bn," he added.

Tapering concerns

The chairman of the US Federal Reserve, Ben Bernanke, said in May that the US might start to rein back on its $85bn-a-month bond-buying programme.

The programme was introduced with the aim of increasing liquidity in the markets after the global financial crisis. Part of the increased cash has flowed into emerging markets, helping to lift asset prices there.

But Mr Bernanke's statement, coupled with a recovery in the US economy, has seen investors pull out money from these economies.

They have been rushing to buy dollars in anticipation of higher returns.

That has resulted in volatility in the stock markets and currencies of these nations - triggering concerns about the impact of such moves on the overall growth.

Against the US dollar, the Indian rupee has weakened 24%, South Africa's rand nearly 17%, Brazilian's real 15% and Russia's rouble 8% since May.

China's yuan - which is traded within 1% of the daily rate set by the country's central bank - has strengthened slightly.

The latest move to establish the fund is being seen an attempt by Brics nations to tackle any potential volatile movements in their currencies.

China will contribute $41bn to the pool, with Brazil, India and Russia putting in $18bn each and South Africa $5bn.

Earlier this year, Brics nations discussed the formation of a new development bank to fund infrastructure and development projects throughout the developing nations.

More on This Story

Related Stories

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.