Will BRICS Development Bank Change the International Financing Architecture? - Predictions and Reality

Abstract

Over the past years, international financing agencies particularly the Breton Woods institutions such as World Bank, IMF and the regional financial institutions like the Asian development bank, have been criticized for their failure to solve the world’s financial crisis and guarantee global prosperity and well being. While China has lifted up half of its poverty population without following the model prescribed by these institutions, in the last 60 years the World Bank could not set such an example. Despite the failures the Breton Woods institutions led by northern developed countries; they still control the global financial governance without giving little space to those emerging countries with major share of currency reserve. This  constricted space for accumulated reserve rich emerging countries led them to look for alternatives. In recovering from global financial crisis, the emerging and developing nations also expressed their intention to  participate in money allocation decision making process and policy formulation of IMF and World Bank but they did not achieve it. The continuous resistance by the developed countries (mainly US and
Europe) to the reformation of World Bank and IMF governance pushed the major emerging economies to rethink the international financial system. The outcome is the emergence of BRICS and their BRICS development Bank concept, an alternative for self reliance. BRICS was headlined since its conceptualization by Goldman Sachs with predictions and criticisms but over the time it is coming up with the realization of its plan. This paper will critically analyze the predictions by Goldman Sachs article of 2001 and reflect on the realities about the emergence of BRICS development Bank
in changing global economic governance. The analysis is based on the recognized international economic statistical data. The paper will also provide some recommendations for future effectiveness of the bank.

Keywords: BRICS, BRICS Development Bank, Brazil, Russia, India, China, South
Africa