The BRICS bank — an alternative that wasn’t
Topic – GS2: International Relations – BRICS, Global Financial Governance and Global South
- BRICS created the New Development Bank (NDB) in 2015 as an alternative source of development finance.
- The NDB was intended to reduce dependence on institutions such as the World Bank and IMF.
- Despite this objective, around half of NDB’s outstanding bonds are denominated in U.S. dollars.
- The Chinese yuan constitutes a major part of the remaining bond issuance, while local-currency lending remains limited.
- The NDB has also maintained relationships with the World Bank and IMF, making it more complementary than a complete alternative.
- BRICS established the Contingent Reserve Arrangement (CRA) in 2015 with a $100 billion pool of foreign-exchange reserves.
- The CRA was designed to provide emergency financial support to member countries facing balance-of-payments pressures.
- However, the CRA has reportedly never been activated and requires IMF-linked conditions for larger withdrawals.
New Development Bank: Promise vs Reality
- The NDB was created to finance infrastructure and sustainable development projects in BRICS countries.
- Its total project approvals had reached around $39 billion by the end of 2024.
- The bank has approved projects at a faster pace than the World Bank in some comparisons.
- However, its financing structure remains heavily connected to the existing dollar-based financial system.
- Reliance on Western credit-rating agencies such as S&P, Fitch and Moody’s further limits its institutional independence.
- The freezing of NDB operations relating to Russia after the Ukraine conflict also demonstrated the influence of external financial and regulatory pressures.
- Thus, the NDB has created an additional source of development finance but has not fundamentally displaced the existing system.
Contingent Reserve Arrangement (CRA)
- The CRA was established as a financial safety net for BRICS members during external liquidity or balance-of-payments crises.
- It has a total reserve pool of $100 billion.
- Its objective was to reduce dependence on IMF emergency financing.
- However, access to more than 30% of a country’s allocated share requires participation in an IMF programme.
- This IMF linkage weakens the CRA’s claim of being an independent alternative.
- Lack of permanent staff, independent surveillance and research capacity further limits its effectiveness.
The De-dollarisation Challenge
- De-dollarisation has been a major theme in discussions surrounding BRICS.
- However, BRICS has not collectively moved towards abandoning the U.S. dollar.
- The 2025 BRICS declaration reportedly did not even include the term “de-dollarisation”.
- India remains cautious about a common BRICS currency because of possible implications for trade and financial stability.
- China has favoured greater internationalisation of the yuan.
- South Africa has also expressed caution regarding a common BRICS currency.
- BRICS members therefore have divergent approaches towards reducing dependence on the dollar.
Structural Constraints
- The U.S. holds around 16.49% of IMF voting rights, giving it significant influence over major IMF decisions.
- BRICS countries have long demanded greater representation in global financial institutions.
- However, instead of creating a completely separate financial architecture, BRICS has largely built institutions that operate alongside existing ones.
- The NDB works with the World Bank and IMF rather than replacing them.
- The CRA retains an IMF linkage for substantial withdrawals.
- This reflects the difficulty of creating a genuinely autonomous global financial system.
Why BRICS Still Matters
- The NDB has financed infrastructure and sustainable development projects.
- BRICS expansion reflects the growing desire of Global South countries for greater representation.
- Greater use of local currencies could reduce exchange-rate risks and transaction costs.
- Reform of IMF governance could give emerging economies a larger voice in global financial decision-making.
- BRICS can therefore remain an important platform for reforming, rather than necessarily replacing, the existing financial order.
Way Forward
- Increase the share of local-currency financing by the NDB.
- Strengthen the CRA’s independent surveillance and crisis-response capacity.
- Reduce excessive dependence on Western credit-rating agencies.
- Reform IMF quota and voting structures to provide greater representation to emerging economies.
- Develop interoperable cross-border payment systems rather than rushing towards a common BRICS currency.
- Strengthen financial cooperation while respecting differences among BRICS economies.
- Focus on practical development finance instead of symbolic challenges to the dollar.
Conclusion
BRICS has not yet created a truly alternative global financial architecture. The NDB and CRA remain closely connected to the existing system they were intended to complement or challenge. Nevertheless, BRICS can still advance the interests of the Global South by pursuing greater representation in the IMF and World Bank, expanding local-currency financing and developing more resilient financial and payment mechanisms. The realistic objective should be reform and diversification of the global financial order rather than an abrupt replacement of the dollar-based system.