There might be a lot of excitement in South Africa at the moment with the recent establishment of a development bank for Brics countries. But an expert warns that the country should not get too carried away, as the bank still has to earn its stripes.
Chris Hart, Chief Strategist for Investment Solutions, says Brics Development Bank will have to shift from being an institution that is merely anti-west into one with substance. “Being anti-something fails to provide a reason for existence. The higher purpose of the organisation is lacking, especially considering that the cohesion within the Brics remains fragile, because the countries do not appear to have that much in common.’
The danger with the Brics Development Bank is that it could be used as a vehicle to gain global influence, Harts fears. “What will the bank do differently from a myriad other development finance institutions?”
The Brics Development Bank does not need to merely bypass the IMF and World Bank, Hart argues. “If anything, the loan conditionality of the IMF and World Bank are part of their risk-control measures. The reforms that they insist on are meant to improve the circumstances that brought the distressed countries in trouble in the first place.”
The last thing the Brics Development Bank could do is to simply want to gain favour with less savoury regimes by putting into place risk-mitigation measures, warns Hart. “By following this approach, it may well be doomed.”