A Welcome Challenge to Bretton Woods System

Published: 17th July 2014 06:00 AM  |   Last Updated: 17th July 2014 12:17 AM   |  A+A-

The setting up of the New Development Bank at the summit of five emerging economies—Brazil, Russia, India, China, and South Africa—is a major victory for India, which had put its full weight behind the move. Appropriately, an Indian nominee will be the first president of the bank. That its capital will be equally shared by the founding members was emphasised by India to prevent its domination by China or anyone of the members. As prime minister Narendra Modi said, the bank would not only help member-nations but also other developing nations that are neglected by the US and West-dominated financial institutions like IMF and World Bank.

This is truly a heartening move since the Bretton Woods system has been discriminatory and the institutions have been imposing pro-West models on others. Indeed, they have been putting stringent conditions for providing aid and even dictating fiscal policies to the developing countries. The IMF and World Bank have even planted their people in many countries to browbeat them. It is now for the BRICS leaders to ensure the new development bank becomes a much more effective monetary instrument for developing  the developing world. The goal should be to make the bank a deterrent to unipolar financial dominance. Significantly, the BRICS nations represent 40 per cent of the world population and a fifth of the economy.

According to the BRICS summit declaration, the new bank will help emerging and developing nations mobilise resources for infrastructure and sustainable development projects. It would give these countries greater confidence to question the indignities heaped on them by institutions dominated by the US and Europe. It is to be hoped that the cohesion that the five BRICS nations displayed would be carried further. Now that BRICS has paved the way for a development bank, its leaders must press harder for reform of these two institutions to give developing countries more voting rights. Indeed, the IMF and World Bank must be made to reflect the unquestionable weight of emerging countries.

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