Zim turns to BRICS bank for funding

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Zimbabwe intends to join the New Development Bank (NDB), the multilateral bank set up by the vibrant BRICS states, to expand sources of capital for infrastructure development, according to Finance, and Economic Development Minister Professor Mthuli Ncube.

Mthuli revealed this in an interview with CGTN Africa, an African division of China Global Television Network, the English-language news channel run by Chinese State broadcaster China Central Television during his recent interview in the United Kingdom (UK).

The NDB originally served the five BRICS countries — Brazil, Russia, India, China and South Africa — and has now added Bangladesh, the United Arab Emirates and Egypt.

It was established to mobilise funds for infrastructure in emerging markets and the developing world and out of concern that the current architecture and governing structure of existing International Financial Institutions led by the Brettonwoods institutions restructured and reflect the changes in the world economy as well as increasing the voices and representations of emerging economies and developing countries.

Zimbabwe’s huge external debt has been preventing it from accessing funding from some multilateral financial institutions such as the International Monetary Fund (IMF).

The external debt, expected to be roughly US$17,5 billion including arrears, have also seen foreign investors shun the country due to its high-risk profile.

“We have made contact with the management; we have made contact with the current shareholders for us to progress that initiative,” said Mthuli.

“We look forward one day to then being accepted into the BRICS bank. We are trying to expand sources of capital, we are trying to expand various platforms where we can source additional capital for development. What we want to achieve is just (an) additional source of capital for infrastructure development and for the development agenda; to move the country forward. We recognise that we have to keep expanding sources of capital and the BRICS bank is one such source of capital.

The BRICS association is working on the development of criteria for the admission of new members and decisions on new members will be made by all five countries.

The Ambassador for Special Assignments for Asia and BRICS in the Ministry of Foreign Affairs of South Africa and the Sherpa of the of South Africa in BRICS, Anil Sooklal, said the criteria for admitting new members was being worked out and would be presented next month at the summit of foreign ministers of BRICS member states.

Russian Council Speaker, Valentina Matviyenko, recently said the development of common mechanisms of admission of other states to the NDB would show “the seriousness of the organisation; not to (admit) everyone at once under unclear principles.”

By expanding membership, the BRICS can increase its influence and promote the multi-polar world.

Counties that have expressed willingness to join BRICS include Algeria, Argentina, and Iran.

Based in Shanghai, China, the NDB has a portfolio of project approvals worth US$32,8 billion.

BRICS currency

The BRICS nations are already looking to establish a new reserve currency backed by a basket of their respective currencies. The BRICS states have been pushing for settling more trade in non-US dollar units with projects ranging from the use of local currencies to a gold-backed stable coin and a new BRICS reserve currency.

A new BRICS currency would also strengthen economic integration within the BRICS countries, reduce the influence of the US on the global stage, weaken the standing of the US dollar as a global reserve currency, encourage other countries to form alliances to develop regional currencies, mitigate risks associated with global volatility due to unilateral measures and the diminution of dollar dependence.

The reaction from non-BRICS countries has been a mixed bag. Some nations, like Turkey and Saudi Arabia, are considering joining the BRICS. Some experts believe a BRICS currency is a flawed idea, as it would unite countries with very different economies.

There are also concerns non-Chinese members might increase their dependence on Beijing’s yuan.

According to the International Monetary Fund, China constitutes 70 percent of BRICS economy, India about 13 percent, Russia, Brazil around 7 percent and South Africa 3 percent.

Saudi Arabia, Egypt and Turkey have a combined population of around 220 million people. Saudi Arabia is one of the world’s largest crude oil exporters (the largest in 2020), accounting for 11 percent of the world’s petroleum liquid production and holding 15 percent of the world’s oil reserves. Egypt, the largest of the three population-wise with just over 102 million people, is also an important petroleum producer and exporter. Its other key export commodities include cotton and textiles, followed by plastic, raw materials and chemical products.

With over 84 million people, Turkey’s main exports include motor vehicles, spares, gold, and petroleum oils. It is also the world’s seventh-largest exporter of cotton.

Meanwhile, Minister Mthuli said Zimbabwe’s huge debt overhang had long prevented the country from accessing capital to fund long infrastructure projects and foreign direct investment, noting China had been the most notable investor in the country.

“China has been a large investor in Zimbabwe,” said Minister Mthuli. “Zimbabwe has had challenges in attracting other investors who seem to be concerned about its credit status in terms of the areas that we owe to various countries out there and China has been very forthcoming g to support Zimbabwe, so right across the board…in the mining sector, in the agriculture sector and then also investment in the critical infrastructure especially energy China has been very important.”

The African Development Bank (AfDB) president Dr Akinwumi Adesina was appointed to champion the country’s arrears clearance and debt resolution process alongside former Mozambique president Joachim Chissano through structured dialogue platform meetings.

Supported by the AfDB, senior members of the Zimbabwean government have already met thrice with the country’s development partners—diplomatic representatives of mostly creditor countries—and multilateral finance institutions.

President Mnangagwa told delegates in February at the second meeting with creditors that Zimbabwe’s debt burden continued to weigh heavily on the country’s development efforts and assured delegates that Zimbabwe was committed to clearing all its outstanding arrears. – Business Weekly