Could BRICS Bank Replace IMF as Lender?

The New Development Bank (NDB), established by the BRICS nations to fund sustainable development and infrastructure projects in the member countries and other developing nations and emerging markets, recently approved loans worth $1.1 billion for India and China.

The decision was taken during the 42nd meeting of the bank’s board of directors in Dubai.

The loan by the NDB for China is the first non-sovereign loan in the country and the funds will be used by the Chinese bank to finance sustainable infrastructure projects in the Zhejiang Province focusing on clean energy and energy efficiency, transportation and logistics as well as water and sanitation.

Meanwhile, the loan for India will be used to enhance rural connectivity and improve access to markets, health, and education centres in Gujarat whereas in Bihar the funds will be used to improve rural transport connectivity by constructing roads under the state-sponsored rural connectivity programme.

Sputnik India reached out to economic experts to talk about the viability of the NDB against major financial institutions like International Monetary Fund (IMF), challenges for NDB, advantages for the BRICS bank and could it play a crucial role in fostering a multipolar world.

Heads of delegations of the BRICS member states in Johannesburg, August 22, 2023

New Development Bank: Small but Promising

Talking about viability of the NDB, economic expert Praveen Jha told Sputnik India that in terms of scale the NDB remains very small as compared to IMF or World Bank but things can change in the near future.

“It will be too early to claim that NDB can be a viable option against IMF but it can be in next 15-20 years,” Jha stated adding that the viability of the NDB as an alternative also depends on the economic power of the Global South.

Meanwhile, another economic expert Sudhanshu Kumar was of the opinion that the BRICS-sponsored bank has yet to emerge as a financial institution capable of affecting the global financial order.

“So far, the bank has worked as an agency that can lend for development projects based on merits similar to investment. The limitation of such an institution is that, unlike the IMF, it is a group of very few countries,” Kumar told Sputnik India.

IMF Makes Profits from Countries in Need

Sharing the views about advantages of the BRICS Bank in comparison to IMF policies which place harsh conditions on countries like Sri Lanka and Pakistan, Jha said that the IMF particularly has been very difficult kind of lender.

“IMF has a history of making profit out of situation of the countries which are in desperate space. On many occasions, countries have said that we can’t repay so you have to reschedule the loan and this happened recently in the context of COVID. So, there is a very strong case that these institutions particularly IMF has not been a friendly lender,” Jha stated.

A child runs through the wreckage of her home damaged by Cyclone Mocha at Saint Martin island in Cox's Bazar, Bangladesh, Monday, May 15, 2023.

He opined that in that sense BRICS Bank, given the fact that it’s based in South and would be much more caring and has been more inclined to look at developing countries with a different lens however it would not be lending too much but the terms and conditions would be somewhat certainly better.

Meanwhile talking about the BRICS Bank’s role in fostering a fairer, multipolar world, Kumar said that much work remains to be done to transform the NDB into a reliable global institution.

“It also needs a more extensive corpus to serve as an institution with a better magnanimity. It has a long way to build its credibility beyond lending for development projects as an investor,” Kumar stated.

Echoing the views of Kumar, Jha said that if the NDB has to foster a multipolar world it has to really go a long way and become much more robust.

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29 August 2023, 17:42