Several countries to create own version of IMF

Leaders from Brazil, India, Russia, China, and South Africa are launching a $100 billion development bank this week to challenge the US-dominated World Bank.
Sergei Karpukhin/Associated Press/File
Leaders from Brazil, India, Russia, China, and South Africa are launching a $100 billion development bank this week to challenge the US-dominated World Bank.

WASHINGTON — Fed up with US dominance of the global financial system, five emerging market powers this week will launch their own versions of the World Bank and the International Monetary Fund.

Brazil, Russia, India, China, and South Africa — tagged the BRICS countries — are seeking ‘‘alternatives to the existing world order,’’ said Harold Trinkunas, director of the Latin America Initiative at the Brookings Institution.

At a summit Tuesday through Thursday in Brazil, the five countries will unveil a $100 billion fund to fight financial crises, their version of the IMF. They will also launch a World Bank alternative, a new bank that will make loans for infrastructure projects across the developing world.


The five countries will invest equally in the lender, tentatively called the New Development Bank. Other countries may join later.

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The BRICS powers are still jousting for the location of the bank’s headquarters — Shanghai, Moscow, New Delhi, or Johannesburg. The headquarters skirmish is part of a larger struggle to keep China, the world’s second-biggest economy, from dominating the new bank the way the United States has dominated the World Bank.

The bloc comprises countries with vastly different economies, foreign policy aims, and political systems — from India’s raucous democracy to China’s one-party state.

Whatever their differences, the BRICS countries have a shared desire for a bigger voice in global economic policy. Each has had painful experiences with Western financial dominance. They’ve contended with economic sanctions imposed by Western powers, or they’ve been forced to make painful budget cuts and meet other strict conditions to qualify for emergency IMF loans.

Now, says Thomas Wright, a fellow at Brookings’ Project on International Order and Strategy, ‘‘they want a safety net if they fall out with the West.’’


Developing countries have also been frustrated because the US Congress has refused to approve legislation providing extra money to help the IMF make more loans to countries in trouble. The money is part of a broader reform program that would give China and other developing countries more voting power at the IMF.

Uri Dadush, an economist with the Carnegie Endowment for International Peace, sees no problem with the BRICS countries’ development bank and financial crisis fund. But he worries that the five countries’ decision to go outside of existing institutions provides more evidence of the ‘‘fracturing of the postwar (economic) system that gave us so much peace and prosperity. The system has not been able to adapt to the new reality, the rise of the new powers.’’

The IMF and the World Bank seem to be taking the new challengers in stride.

‘‘All initiatives that seek to strengthen the network of multilateral lending institutions and increase the available financing for development and infrastructure are welcome,’’ IMF spokeswoman Conny Lotze said. ‘‘What is important is that any new institutions complement the existing ones.’’