BRICS urges New Development Bank to boost local-currency financing and expand project funding
At the 18th BRICS summit in New Delhi, members called on the New Development Bank to increase financing in members' own currencies and widen its resource-mobilising capacity.
During the recent BRICS summit in New Delhi, the bloc pressed the New Development Bank (NDB) to expand financing denominated in members' own currencies, stressing the importance of de-dollarisation for emerging economies. Established in 2015 by the original five BRICS nations, the NDB is headquartered in Shanghai and now counts Bangladesh, the United Arab Emirates, Egypt, Algeria and Uzbekistan among its members, with more prospective entrants.
The bank funds its activities through member capital and by issuing benchmark, thematic and locally-denominated bonds, allowing it to manage borrowing costs while supporting infrastructure and sustainable-development projects. By borrowing directly in domestic markets and lending the same currency to sovereign or sub-sovereign borrowers, the NDB seeks to eliminate currency-mismatch risks. It targets local-currency financing to reach 30 % of its loan portfolio, and is preparing its first on-shore Indian rupee “Maharaja Bond” with backing from the Indian government and the RBI.
Why it matters
Expanding local-currency financing can lower borrowing costs and currency risk for developing nations.
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