The BRICS alliance is set to announce a new guarantee fund to boost investments among member countries. The guarantee fund will be backed by the New Development Bank (NDB) to lower financing costs, reported Reuters. The program is similar to the World Bank’s Multilateral Investment Guarantee Agency (MIGA) which addresses investment shifts when there’s uncertainty surrounding the White House’s economic policies.
The BRICS guarantee fund will lower the cost of financing as it will be an in-house disbursement. Brazil, which hosts the 17th summit could open the dialogue keeping the new guarantee fund as the centerpiece of the financial agenda. The funds are expected to be announced during the summit in Rio de Janeiro, said two sources close to the matter.
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BRICS Multilateral Guarantee (BMG) Fund to Be Announced During the 17th Summit
The new fund will be named BRICS Multilateral Guarantee (BMG) and will be fostered by the New Development Bank. Sources familiar with the development revealed that the mechanism has received technical approval from the bloc’s member nations. However, the final signature could be formalized during the summit by their finance ministers and make it official.
“This is a politically significant guarantee instrument. It sends a message that BRICS is alive, working on solutions, strengthening the NDB, and responding to today’s global needs,” said a source on the condition of anonymity about the new fund. The alliance is pulling out various methods to bypass the US and Western dominance in the financial sector.
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It is paving the way for a multipolar financial world with the new BRICS Multilateral Guarantee Fund. However, many challenges could emerge as it needs to attract bigger private-fund players into its fold to keep it sustainable. The institutional investors and commercial banks will work closely to help the NDB mitigate risks and make it a reality.