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Su Yi
Correspondent
Major developing countries and emerging economies will be meeting in South Africa for the 15th BRICS summit from August 22 to August 24.
Development finance is high on the agenda of the summit amid uneven post-pandemic recovery.
Established by the BRICS countries in 2015, the New Development Bank is anticipated to play a bigger role in promoting the development agenda of emerging economies. Zimbabwe has applied to join the institution.
I believe this is a wise move and I think African countries have every reason to embrace it.
First and foremost, the young and promising financing tool helps to address near-term funding issues.
The World Bank predicts that growth of sub-Saharan African countries will slow down to 3.2 percent in 2023, slower than the average 4 percent among all developing economies.
The sluggish economy is dragging down the progress of development programmes.
The situation is likely to be exacerbated by geopolitical uncertainties caused by the lingering Ukraine conflict, including the fallout from the breakdown of the Black Sea grain deal, which will push up global food prices.
African economies need more resources to shore up their post-pandemic recovery, on top of the existing financing channels.
The New Development Bank is a reasonable supplement.
Secondly, to get involved in a financing platform that is in favour of using local currencies would be a beneficial hedge to fluctuation of the US dollar and the euro.
Largely due to hawkish and uncoordinated financial and fiscal policies, currency fluctuation has caused headaches to the world economy since the onset of the post-pandemic era. Developing countries have also borne the brunt of currency fluctuation, heavier than what it has been in the US and Europe.
Under such circumstances, any lending facility would require stable currencies and ample funding to support its credibility. BRICS countries, such as China and India, which have strong bond markets and resilient currencies, are capable of contributing to the stability of the development bank.
Also, members of the New Development Bank and the BRICS group are like-minded in the realm of increasing the presence of local currencies in development finance and cross-border settlements.
To join the club is certainly a smart idea to increase resilience against currency fluctuation.
Thirdly, one evident trademark of NDB-financed projects is green transformation.
It has been suggested that the developing countries in Africa are likely to be the most direct victims of climate change, yet both the financial assistance they have received in this realm and the financial promises from traditional polluters are badly insufficient.
The New Development Bank prioritises green financing simply because it is a critical issue for the developing world, which has limited options but to take care of themselves, and get prepared for the consequences of humanity’s inability to address the issue on time.
Around 40 percent of existing NDB projects are related to efforts designed to address the impacts of climate change.
There is little doubt that any proposals connected with sustainable growth in Africa will get particular attention from the lending bank.
Lastly, to join a young financing platform like the New Development Bank is in-line with the long-term ambitions of developing countries — better representation in global governance and a more multipolar world order.
It has been argued that the establishment of a financing platform is the eventual threshold of the maturing of South-South co-operation. A persuasive example would be the speculation towards the creation of a BRICS currency. Although it is an idea very far away down the road, it is indeed an ambition of South-South co-operation.
One could argue that for African countries, in the long run, the benefits of getting involved in this BRICS development bank outweigh any negative by products and short-term concerns.
New Development Bank officials say they will not try to disrupt and replace the existing schemes of global and regional development finance, as the financing structure of the bank is still US-dollar centric and it is not their intention to replace the US dollar or established financial institutions.
In fact, the bank’s president, former Brazilian President Dilma Rousseff, has promised closer partnership with other multilateral financial institutions.
It will not be an either-or choice for African countries to join the New Development Bank.
So far, the New Development Bank has approved almost 100 projects totalling more than US$34 billion.
Apart from founding members Brazil, Russia, India, China, and South Africa, it has been joined by Bangladesh, the United Arab Emirates and Egypt.
Uruguay is in the process of joining the NDB, while Saudi Arabia is in talks to become a member.
It is time for more African countries to follow suit and join the club.
l Su Yi is a host with Deep Dive, CGTN
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