The BRICS bloc of large, emerging economies has agreed on the structure of a proposed development bank with $50 billion (€37.8 billion) in capital, but ironing out "difficult" details may take months, Russian Deputy Finance Minister Sergei Storchak said.
Officials from Brazil, China, India, Russia and South Africa agreed in early August that the bank's capital should come from three payment categories, including subscriptions, Storchak told journalists in remarks for publication on Monday (2 September).
The establishment of the development bank aimed at providing funds for infrastructure projects has been slow in coming, with prolonged disagreement over funding and management of the institution.
"We must assume that the bank will not start functioning as fast as one could imagine," Storchak said. "It will take months, maybe a year."
At the summit of the Group of 20 developed and developing nations this week in Russia's St Petersburg, BRICS leaders will meet in an unofficial format, Storchak said, to discuss the progress on setting up the bank and a joint reserve fund.
The issues of division of the capital, payment of the capital, the location of the bank and the bank's management still needed to be decided, Storchak added.
"These are systemic themes, complicated, (and) negotiations are difficult," he said, adding that he hopes that some decisions will be made soon.
The group has struggled to take coordinated action after an exodus of capital from Brazil, Russia, India, China and South Africa prompted by an expected scaling back in US monetary stimulus raised fears about the health of their economies.
On Friday, India said it was seeking support from other emerging economies for coordinated intervention in offshore foreign exchange. India's currency has shed a fifth of its value against the dollar in the past three months.
But Brazil rejected outright involvement in any intervention and other major emerging economies, including Russia, would not comment.
In June, at the G20 finance ministers meeting in Moscow, the group failed to take joint action to withstand spillover effects from US policies.
The establishment of the group's development bank was first proposed in 2012, but approve only earlier this year at a BRICS summit in Durban, South Africa.
A Brazilian government official directly involved in the negotiations on BRICS development bank said members are still discussing how much each country will put in.
He said Brazil supports the idea of each country contributing $10 billion (€7.6 billion) for the new bank.
"There are some countries that want a different structure," said the official, who asked for anonymity because he was not allowed to speak publicly about the matter. "It's not going to be an easy negotiation, we are not there yet."
China, the largest BRICS economy worth €6.2 trillion and a growing global influence, had earlier proposed $100 billion (€75.7 billion) capital and sought a bigger share, igniting disagreements and slowing negotiations.
Brazil and other BRICS peers have launched a series of multi-billion dollar infrastructure projects to refurbish dilapidated airports, roads and railways and keep their economies going. The new development bank, in principle, would help finance these projects.
The grouping of the emerging economies – Brazil, Russia, India, China and South Africa (BRICS) have held a financial summit in South Africa from 26 to 28 March.
Once a loose political affiliation, the BRICS bloc is now a serious economic contender in the world economy, representing 40% of the world’s population, and accounting for one fifth of global GDP.
The five countries hold foreign-currency reserves of €3.4 trillion, and need an institution to safeguard this amassing wealth. The reserve will also protect members from short-term liquidity volatility and balance-of-payment problems.
One long-running speculation is that the BRICS nations would ultimately want to form their own currency as an alternative to the US dollar and the euro. This could reduce demand for the dollar as a reserve currency, which could lower the dollar's value relative to other currencies.