Hideo Nakamura The New Development Bank (NDB), also recognized as the BRICS bank, is formulating plans to provide a larger proportion of loans in local currencies with the aim to lessen the reliance on the U.S. dollar and evade foreign exchange risk. “The creation of a diversified global currency system is imperative,” asserted the President of NDB, emphasizing that “going forward, it’s improbable for one singular currency to hold sway over the global monetary system. We anticipate a rise in the use of local currencies for trade settlements.”
Table Of Contents
Expect an Increase in Local Currencies for Trade Settlements
Originally known as the BRICS Development Bank, the NDB intends to finance a greater number of projects in local currencies. This bank was initiated by the BRICS nations, namely Brazil, Russia, India, China, and South Africa. Alongside these founding members, Bangladesh, the United Arab Emirates (UAE), and Egypt have become participants. Moreover, Uruguay is a potential future member, and there are indications that Saudi Arabia is negotiating to potentially join the bank.
On Tuesday, during the annual meeting of the Shanghai-based lender, NDB President Dilma Rousseff stated that the bank’s objective is to offer 30% of its loans in local currencies, a substantial increase from the current 22%. The U.S. dollar has predominantly been used for the bank’s financing operations. In a press briefing, Rousseff stated: “We need to institute a varied global currency system … As we move ahead, it’s unlikely that a single currency will reign over the global monetary system. We’ll observe an increase in the use of local currencies for trade settlements.”
She further underscored the NDB’s plans to deepen its cooperation with other multilateral and national banks. The bank also aims to amplify its global impact and reach by actively encouraging more nations to become members, thus widening its business operations and influence. According to information on its website, the bank has sanctioned 96 projects, with a total approved financing of $32.8 billion.
During a discussion with the Chinese media outlet CGTN last month, Rousseff elaborated: “It’s essential to discover methods to evade foreign exchange risk and other problems, such as dependence on a solitary currency like the U.S. dollar.”
What’s your opinion on the New Development Bank’s (NDB) intention to finance projects in local currencies to diminish the reliance on the U.S. dollar? Share your thoughts in the comments section below.
What is the New Development Bank’s (NDB) new plan regarding its loan system?
The NDB, also known as the BRICS Bank, is planning to increase the proportion of loans offered in local currencies from 22% to 30%. This is part of an effort to decrease dependence on the U.S. dollar and reduce foreign exchange risk.
Who are the members of the NDB?
The NDB was founded by the BRICS nations: Brazil, Russia, India, China, and South Africa. In addition to these founding members, Bangladesh, the United Arab Emirates (UAE), and Egypt have also joined. Uruguay is currently a prospective member, and Saudi Arabia is reportedly in discussions to potentially become a member as well.
What is the goal behind NDB’s decision to increase loans in local currencies?
The main goal behind this decision is to create a diversified global currency system and to reduce dependency on the U.S. dollar. It’s part of a larger strategy to encourage the use of more local currencies in global trade settlements.
How many projects has the NDB approved so far?
As of the latest update, the NDB has approved 96 projects, amounting to a combined approved financing of $32.8 billion.
What are some of the strategies that the NDB is employing to expand its influence?
The NDB is planning to strengthen collaboration with other multilateral and national banks. It is also actively inviting more nations to join the bank, thus expanding its business operations and global influence.
