Is BRICS Bank Going Against the IMF? Brazilian President Rousseff Says No

Jul 16, 2014 07:16 PM EDT

(L-R) Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma join their hands at a group photo session during the 6th BRICS summit in Fortaleza July 15, 2014. Leaders of these five countries are holding an annual summit in Brazil this week where they are expected to sign a deal creating a $100 billion development bank and a currency reserve fund of the same amount. REUTERS/Nacho Doce

The new development bank set up by the emerging-market bloc of BRICS (Brazil, Russia, India, China and South America) is not going against the existing western-backed International Monetary Fund (IMF), said Brazilian President Dilma Rousseff.

Rousseff tried to douse off speculations that the New Development Bank (NDB), which will be headquartered in Shanghai, China, is renouncing the IMF although she stressed that the new BRICS bank will always have a different stand from the IMF.

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"The NDB will complement the World Bank and the IMF. We don't have any interest in renouncing the IMF," said Rouseff after meeting Indian Prime Minister Narenda Modi in the sideline of the BRICS Summit in Fortaleza, Brazil.

The new BRICS development bank will have an initial capital of US$50 billion, with each member nation contributing US$10 billion.

The bank will provided funding for infrastructure and sustainable development projects in member nations and other emerging nations around the world, the Fortaleza Declaration signed by BRICS leaders stated.

The bank will also have a reserve fund of US$100 billion, with China contributing the biggest amount at US$41 billion. The fund will serve as a contingent fund that can be accessed by member nations in the event of a financial crisis or an economic downturn.

Rouseff said the NDB is an "extremely important" development for the BRICS nation because it will dramatically change their financing conditions, now that they already have an alternative to the World Bank and the IMF.

"We are not against the IMF we just want the NDB to be more democratic, more representative," Rouseff said.

As this developed, BRICS leaders have finally broke the deadlock on where to locate the headquarters for the new development bank by agreeing to place it in Shanghai, China. The BRICS leader also decided to set up a regional center in South Africa.

Last Tuesday, the selection of the headquarters was stalled when India challenged China's interest to host the NDB headquarters.

TagsBrics Bank, IMF, Fortaleza Declaration, Brazilian President Dilma Rousseff