- Sharp rise in number of RAF planes scrambled to face down Russian jets revealed
- China, Russia To Hold Joint Naval, Air Drill
- China’s Christians protest ‘evil’ Communist campaign to tear down crosses
- South China Sea: Beijing blames US military for tensions in region
- Greece debt crisis: IMF staff baulk at signing up to new bailout deal
- Why Italy is the most likely country to leave the euro
- Did Hitler have an atomic weapon? German documentary claims Nazis were developing a ‘flying saucer’ to deliver bomb and had already started tests on Russian POWs
- 4th Planned Parenthood video shows clinic staff knowingly flouting laws
- Court bars anti-abortion group from releasing new videos of Calif. company officials
- Major U.S. companies go nuts for ‘gay’ rights
It’s Official: BRICS to commit $100 billion to FX fund, completion a way off
The BRICS emerging economies will set up a $100 billion fund to steady currency markets, Russia’s Vladimir Putin said on Thursday, but it looks unlikely to be in place soon enough to temper the effects of an expected pullback of U.S. monetary stimulus.
China, holder of the world’s largest foreign exchange reserves, will contribute the bulk of the currency pool. But officials said it would not be functional for some time yet.
Cheap dollars that fueled a boom in Brazil, Russia, India, China and South Africa over the past decade have turned tail since Ben Bernanke, chairman of the Federal Reserve, warned in May of a ‘taper’ in the U.S. bond-buying scheme.
“The initiative to establish a BRICS currency reserve pool is at its final stage,” president Putin said in opening remarks to a meeting of BRICS leaders during a Group of 20 summit in Russia’s second city, St. Petersburg. “Its capital volume has been agreed at $100 billion.”
At the meeting of BRICS leaders, China committed $41 billion; Brazil, India and Russia $18 billion each; and South Africa $5 billion.
One BRICS official said the technical details could be sorted out by the time the group meets next March but even after that, it will only become operational after ratification by each country’s parliament.
Earlier, both Chinese Vice Finance Minister Zhu Guangyao and Russian Deputy Finance Minister Sergei Storchak said details still needed to be worked out.
“We have asked not to create unnecessary expectations,” Storchak told Reuters. “Politically, the countries are ready, but technically they are not.”
A joint BRICS development bank, with capital of up to $50 billion, is also still months away from realization amid disagreements over burden sharing and where it should be based.
Last year’s original initiative foresaw creating a pool of central bank funds available to BRICS facing balance of payments difficulties. There was also a push to create an IMF-style credit line to insure against external shocks.
The Fed is widely expected this month to take its first steps to reduce extraordinary monetary stimulus, with potentially huge implications for a global financial system where the U.S. dollar accounts for 62 percent of reserve assets.
A Reuters survey of over 50 foreign exchange strategists put the probability of joint intervention by emerging-nation central banks within the next few weeks at just 15 percent. Only three said the likelihood was greater than 50 percent.