NDB seeks more local-currency projects
Lender aims to avoid forex fluctuations amid rising geopolitical tensions
The New Development Bank (NDB), which funds infrastructure developments in emerging economies, is looking to finance more projects in local currency as a way of avoiding fluctuations in exchange rates.
Dilma Rousseff, president of the Shanghai-headquartered lender, told the bank’s annual meeting yesterday it envisioned 30 per cent of loans being offered in local currencies, up from 22 per cent at present. It currently uses the US dollars for most of its financing.
Anil Kishora, vice-president and chief risk officer, later told reporters at a media briefing the goal would be achieved within five years.
“We need to create a diversified global currency system,” Rousseff told the briefing. “In the future, it is unlikely that one single currency can dominate the world’s currency system. We will see more local currencies used to settle trade.”
To date, the multilateral bank, founded in 2015 by Brazil, Russia, India, China and South Africa, known as the BRICS countries, has granted loans worth US$33 billion to more than 96 projects in its five founding member countries, according to its website.
The president’s statement on local-currency financing comes amid heightened geopolitical tensions after Russia’s invasion of Ukraine and the West’s souring relations with China.
Vice-Premier Ding Xuexiang said at the annual meeting a global economic recovery was not on a solid footing and Beijing would remain determined in its resolve to develop the NDB into an open multilateral bank, together with other stakeholders.
“The NDB is designed to better serve the emerging economies by financing more infrastructure construction and sustainable projects,” he said.
The bank has accepted three new members in recent years: Bangladesh, the United Arab Emirates and Egypt.
Uruguay is in the process of joining the bank, while the Financial Times reported earlier this month Saudi Arabia was in talks to be a part of it.
The NDB announced it had issued 8.5 billion yuan (HK$9.4 billion) worth of panda bonds on the mainland’s interbank bond market. It said the bank’s successful sale of the bond reflected investor confidence in the institution and its strong reputation in the market.
Rousseff said the bank would aim to diversify its sources of funding by mobilising more financial resources denominated in currencies such as the yuan, the US dollar and the euro to support infrastructure and sustainable projects in the member countries.
The NDB is one of the two policy banks heavily backed by Beijing to support infrastructure construction in emerging economies as China wields its influence worldwide.
Along with the Asian Infrastructure Investment Bank, a multilateral lender initiated by President Xi Jinping, they are pitched as alternatives to established institutions such as the World Bank.
The NDB, formerly called the BRICS Development Bank, had an initial capital base of US$50 billion, evenly contributed by the five founding countries.
Rousseff, who took office at the NDB in March this year, said the bank would work more closely with other multilateral and national lenders. She will hold the president’s role until July 2025 when Brazil’s chairmanship comes to a close. The former Brazilian president helped set up the bank in 2014, part of the BRICS nations’ efforts to wield influence in the global financial system.