BRICS signs pact to extend credit in local currencies

New Delhi: To reduce transaction costs of intra-BRICS trade, the five-member emerging economies' group on Thursday inked a pact to extend credit in respective local currencies.

The agreement, signed at the conclusion of the fourth BRICS Summit here, is intended to reduce the demand for fully convertible currencies for transactions between Brazil, Russia, India, China and South Africa (BRICS).

The grouping also signed an agreement on Letter of Credit (LC) Confirmation Facility which envisages confirmation of LCs on receipt of a request from an exporter, exporter's bank or importer's bank.

The Prime Minister, Dr Manmohan Singh, also called for greater interaction amongst business communities. “Issues such as easier business visas must be prioritised. As large trading countries, BRICS countries have a strong interest in removing barriers to trade and investment flows and avoiding protectionist measures,” he added.

Development Bank
Addressing the Summit, Dr Singh said, a suggestion had been made to set up a BRICS Development Bank. “We have directed our Finance Ministers to examine the proposal and report back at the next Summit,” he said. The BRICS Finance Ministers will study the feasibility and viability of the initiative and set up a joint working group for the study.

The proposal on the BRICS Development Bank formed part of the Summit's Delhi Declaration.

The proposed development bank will be for mobilising resources for infrastructure and sustainable projects in BRICS and other emerging economies and developing countries. The proposed bank's resources are to supplement the existing efforts of multilateral and regional financial institutions for global growth and development.

IMF, World Bank Reform
Significantly, the BRICS countries called for reforming the International Monetary Fund and World Bank by increasing representation from developing countries.

They agreed to support a developing country candidate for the post of World Bank President.

Taking serious note of the impact of the Euro Zone crisis on the world economy, the grouping said “The immediate priority is to restore market confidence and get global growth back on track.”

Referring to the risks of large and volatile cross-border capital flows being faced by emerging economies, they said, “We call for further international financial regulatory oversight and reform, strengthening policy coordination, financial regulation, supervision cooperation, and promoting the sound development of global financial markets and banking systems.”

The BRICS countries also called for closer co-operation to revive the stalled Doha Round talks for a deal on further liberalising global trade.