Thursday, August 8, 2019

BRICS Continues Move Away From U.S. Dollar





The New Development Bank, commonly referred to as the “BRICS Bank” as it is co-owned equally by the 5 BRICS nations of Brazil, Russia, India, China and South Africa, is to scale back its use of the US dollar and concentrate instead of loans designated in national currencies, it has been reported in the Financial Times.
To date, the bank has approved more than US$9 billion in loans to its member countries since being founded in July 2014, and plans to double that to US$16 billion this year. 
The bank is seen as a challenger to established lenders such as the World Bank, Asian Development Bank and IMF. So far it has mainly relied on its dollar paid-in capital for funding, but in the future “50 per cent (of projects) should be local currency financed”, K.V. Kamath, the bank’s president, said in an interview. “We will raise dollars, we will raise euros, but at the same time there will be a significant reliance on local currencies. That would allow the bank to move away from loans denominated in dollars” Mr.Kamath stated.
The bank is headquartered in Shanghai, and issued a second RMB3 Trillion Chinese currency bond this year. It received a AA+ rating from Fitch and S&P Global in August 2018, and also plans to tap bond markets in the United States. The bank’s lending so far has mostly gone back to its founder countries, which have a collective credit rating of BBB-. This allows them to borrow at lower rates though the NDB.


However, as we pointed out in the article China Manipulates Its Currency, Is Caught Out, So Gold Rises In Value. Who’s Been Buying Gold? China. Countries such as China and Russia are already caught up in spats with the United States and are developing alternative strategies to dealing with the US dollar, while bilateral trade between the 5 BRICS members is also increasingly being conducted in non-dollar mechanisms. Other, new tech solutions are also being found; a BRICS Cryptocurrencyhas been discussed, while all five nations are pushing ahead with a cloud based payment system, BRICS Pay a smartphone accessible app that will allow users in these countries access to a common system for retail payments and transactions between the member countries – using only the respective currencies and not the US dollar. These developments come after the BRICS 2018 summit called for “more self reliance” among the member states.


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