BRICS leaders want development bank to aid infrastructure

BRICS leaders said on Wednesday that the establishment of a BRICS Development Bank would help developing countries face challenges of infrastructure development due to insufficient long-term financing and foreign direct investment, especially investment in capital stock.

Earlier in the day, South African President Jacob Zuma announced the establishment of the bank at the fifth BRICS summit taking place in Durban.

"BRICS cooperation towards more productive use of global financial resources can make a positive contribution to addressing this problem," BRICS leaders said in a joint statement.

They said insufficient long-term financing, coupled with lack of foreign direct investment, especially investment in capital stock, "constrains global aggregate demand."

In March 2012, BRICS leaders directed their finance ministers to examine the feasibility and viability of setting up a New Development Bank for mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development, the statement said.

"Following the report from our Finance Ministers, we are satisfied that the establishment of a New Development Bank is feasible and viable," said the statement.

"We have agreed to establish the New Development Bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure."

In June 2012, BRICS leaders in their meeting in Los Cabos, also tasked their finance ministers and central bank governors to explore the construction of a financial safety net through the creation of a Contingent Reserve Arrangement (CRA) among BRICS countries.