Russia, currently leading the BRICS group, is calling for the establishment of a new financial order to challenge the dominance of Western institutions like the International Monetary Fund (IMF) and the World Bank. This ambitious plan, unveiled ahead of the upcoming BRICS summit this month, is driven by a desire to counterbalance the perceived political influence exerted by Western nations.
The BRICS alliance, founded in 2006 by Brazil, Russia, India, and China, expanded its membership to include South Africa in 2010 and has recently welcomed Iran, Egypt, Ethiopia, and the United Arab Emirates. Saudi Arabia is also considering joining, and Azerbaijan and Malaysia have formally applied.
The call for a new financial system comes from Russian Finance Minister Anton Siluanov, who is hosting the meeting. Siluanov argues that the global financial system is controlled by Western countries and that the BRICS group, representing a significant 37% of the global economy, needs to create a viable alternative.
“The IMF and the World Bank are not performing their roles. They are not working in the interests of BRICS countries,” Siluanov stated during the first day of the meeting. He further emphasized the need for “new conditions or even new institutions, similar to the Bretton Woods institutions, but within the framework of our community, within the framework of BRICS.”
The BRICS group’s overarching goal is to amplify the voice of major emerging economies and create a more balanced global order. Its founding members have consistently advocated for a fairer world and pushed for reforms within international institutions like the United Nations, IMF, and World Bank.
This initiative gains urgency from Russia’s recent experiences. Following its invasion of Ukraine in February 2022, Russia faced severe financial consequences, including the freezing of its foreign currency reserves in dollars and euros and a substantial hit to its financial system due to Western sanctions. The country is effectively cut off from international capital markets.
Moreover, Russia has experienced delays in international transactions with its trading partners, including BRICS member countries, as banks in these countries fear punitive actions from Western regulators.
Previously, Russia’s central bank Governor, Elvira Nabiullina, proposed a BRICS Bridge payments system designed to connect member countries’ financial systems. However, progress on this project has been slow.
The only financial institution established by the BRICS countries to date is the New Development Bank, created in 2015 to finance infrastructure and sustainable development projects within BRICS members and other emerging economies.
The upcoming BRICS summit will likely see further discussions on Russia’s proposal for a new financial order, potentially leading to concrete steps towards establishing alternative institutions and a more balanced global financial landscape.
