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BRICS Finance Ministers Meeting Discussed More, and Cheaper, Credit
13 octobre 2024
EIRNS—As reported in this location on Oct. 11, the Oct. 10-11 BRICS meeting of finance ministers and central bank governors, attended officially by nine nations’ ministers, received a proposal for a new cross-border payments system of the BRICS, developed by Russia’s BRICS chairmanship for this year and focused on a new payments platform linking together the BRICS nations’ central banks. The new payment system, aimed to defeat constant U.S. sanctions and economic and currency warfare by the NATO countries, is clearly given first priority by Russia and by most BRICS representatives now. Upon returning from the Finance Ministers meeting, Central Bank of Iran Governor Mohammad Reza Farzin confirmed in a press conference in Tehran that this new system includes developing a network of commercial banks that can conduct banking transactions in local currencies, as well as establishing direct links among central banks. Farzin said, “The BRICS Payment system was proposed with the aim of creating a settlement platform for cross-border payments based on Real Time Gross Settlement Systems (RTGS) and considering Central Bank Digital Currency Tracker (CBDC) mechanisms.” The Russian BRICS Chairmanship Research report (“BRICS Chairmanship Research : Improvement of the International Monetary and Financial System”) also said that the BRICS Contingency Reserve Arrangement—used to defend the value of local currencies—had been limited by “third-party intervention,” presumably again meaning U.S. Treasury sanctions, and has to be reformed through the same link-up of the BRICS central banks in a single platform. The BRICS Chairmanship Research report, in which the proposed new system was laid out, also referred more briefly to the issue of credit for “EMDEs”—emerging markets and developing economies—which has been in a desperate state since the era of the U.S. Federal Reserve’s money-printing and interest rate spike. Under Point 12, the report refers to the crushing debt burden now loaded on the developing countries : “Developing regions are continuing to borrow at rates that are significantly higher than those of developed countries—even if factual risk profiles are at comparable levels. This kind of premium is subsequently reflected in ballooning interest servicing costs—net interest payments in developing countries, on average, accounted for 7.8% of government revenues in 2023 (up from 4.2% in 2010). The structure of the debt itself also carries a premium in the form of often poorly understood risks [of local currency depreciation] when borrowing in foreign (e.g., USD or EUR) rather than national currencies.” Dilma Rousseff, outgoing president of the New Development Bank—whose founding was decided at the BRICS Summit at Fortaleza, Brazil in 2014 (she was then President of Brazil)—said in Beijing at a Sept. 29 press conference : “The World Bank has calculated that African countries pay interest rates on their debts [that are] four times higher than the United States and six times higher than Germany. There is also a discrepancy between interest rates and access to liquidity.” Here the report for the Finance Ministers’ meeting points to the New Development Bank, which will likely have to be the instrument for creation of a new unit of account and/or a BRICS trade currency. Under Point 13 : Multilateral Development Banks (e.g., the New Development Bank) “MDBs play an important role in providing EMDEs with concessional financing, however their resources and governance structure are called into question. Current criticism of MDBs is centered around insufficient voice and representation of EMDEs, and lagging rates of replenishment [of the MDB’s capital]. The New Development Bank’s operating model could be adapted in line with the proposed core principles and serve as an example to other MDBs.” [pbg] |