The BRICS group of nations will create a $100 billion pool of foreign-exchange reserves to help each other weather financial squeezes.
The fund will be an “insurance instrument” for the five nations and goes into effect July 30, Russian central bank Governor Elvira Nabiullina said in Moscow on Tuesday as officials from Brazil, Russia, India, China and South Africa met in Moscow. There are no plans for new members, she said.
Developing countries, which hold about two-thirds of the $11.6 trillion in global reserves, saw a drop in their holdings last year as central banks sold dollars to offset capital outflows and shore up their currencies. They face a crunch later this year if the U.S. Federal Reserve raises interest rates, draining dollars from their markets.
The 1998 financial crisis, when the Russian government defaulted on its local-currency debt, is an example of when such a cushion may have come into use, Nabiullina said.
China will contribute $41 billion, while Brazil, India and Russia will commit $18 billion each and another $5 billion will be provided by South Africa, the Russian central bank said in a statement. The money won’t leave the states’ international reserves until it’s needed.
The group represents more than a fifth of the global economy.
Russia spent almost $90 billion out of its reserves last year in an attempt to keep the ruble’s decline under control before letting it float freely in November. The ruble has lost half of its value against the dollar in the twelve months to January 30, sending inflation in Russia to a 13-year high of 16.9 percent in March.
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