BRICS to launch guarantee fund to spur investment across bloc
What's the story
The BRICS group of emerging economies, Brazil, Russia, India, China, and South Africa, is planning to launch a new guarantee fund, according to Reuters. The fund will be backed by the New Development Bank (NDB) and is aimed at reducing financing costs and boosting investments within member countries. The move is on similar lines to the World Bank's Multilateral Investment Guarantee Agency (MIGA).
Investment strategy
Fund to address global investment shifts amid US economic policy
The initiative is aimed at addressing global investment shifts amid uncertainty over US economic policy. Brazilian officials see this fund as a key part of their financial agenda during their rotating presidency. It is expected to be mentioned in the joint statement at the upcoming BRICS summit in Rio de Janeiro next week.
Fund approval
Proposed mechanism has received technical approval from member states
The proposed BRICS Multilateral Guarantee (BMG) mechanism has received technical approval from member states. It now only requires final signoff from BRICS finance ministers, which is considered a formality. The initiative will use existing NDB resources for projects in developing nations and does not require additional capital from member countries at this stage.
Fund impact
Each dollar in guarantees expected to mobilize more private capital
Though no initial funding value has been disclosed, officials expect each dollar in guarantees provided by the NDB to mobilize between five and 10 dollars in private capital for pre-approved projects. Technical preparations for the fund are expected to be completed by the end of this year, paving the way for pilot projects to receive guarantees in 2026.
Investment challenges
BRICS countries face common challenges as developing nations
BRICS countries face common challenges as developing nations in attracting large-scale private investment in infrastructure, climate adaptation, and sustainable development. Officials argue that guarantees issued by the NDB could help mitigate perceived risks for institutional investors and commercial banks. This is because the NDB's credit rating is higher than that of most member countries.