Leaders of the world’s largest emerging economies said on Thursday they supported tougher measures to guard against financial instability and backed a look at alternatives to the U.S. dollar as the world’s main reserve currency.
A declaration adopted by leaders of the five BRICS nations following their one-day summit in the southern Chinese resort of Sanya offered strong backing for steps to reform the international financial order to make it more diverse and representative. The five countries – Brazil, Russia, India, China and South Africa -- are pushing for a bigger voice for emerging economies in global financial affairs.
Their statement calls for continued reforms to the global financial system in coordination with the Group of 20 industrialized economies, which meets later this year to further changes to the global financial architecture. Without advocating major disruptions, the document makes clear that BRICS members believe the current system no longer adequately serves their interests.
“We call for a quick achievement of the targets for the reform of the International Monetary Fund agreed to at previous G20 Summits and reiterate that the governing structure of the international financial institutions should reflect the changes in the world economy, increasing the voice and representation of emerging economies and developing countries,” the declaration said.
It said reforms were needed because “the international financial crisis has exposed the inadequacies and deficiencies of the existing international monetary and financial system.”
The bloc backed studies into expanding the use of Special Drawing Rights, a quasi currency created by the International Monetary Fund that is used in dealings with and between member governments. That system has been proposed by some as an alternative to the dollar in the international monetary system.
The statement made no mention of the sensitive issue of adding the Chinese yuan to the basket of currencies that make up the SDR, which now comprises the dollar, yen, euro and British pound.
Without mentioning specific countries, the document also expressed concern over instability in Africa and the Middle East, urged against the use of force, and said each nation’s independence, sovereignty, unity and territorial integrity must be respected.
It called for more joint action against terrorism, expressed a desire for a “comprehensive, balanced and binding” agreement on climate change, stressed the importance of renewable energy and the development of nuclear power under strict safety standards.
Volatility in financial and commodity markets is a particular concern for the five countries, which have large stocks of foreign currency and are now grappling with rising inflation.
Greater coordination is needed to guard against the ill effects of massive cross-border capital flows, while excessive volatility in prices for food and energy threatens the fragile global economic recovery, the declaration said.
Though largely an ad-hoc grouping at present, the BRICS have the potential to emerge as a new force in world affairs on the back of their massive share of global population and economic growth. With the inclusion of South Africa this year, the group accounts for 40 per cent of the world’s people, 18 per cent of global trade and about 45 per cent of current growth, giving them formidable heft when dealing with the developed economies.
The meeting was a test of whether Chinese President Hu Jintao, Brazilian President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh and South African President Jacob Zuma could overcome internal differences and act as a bloc with common goals.
China in particular has been accused of erecting barriers to foreign competition. And while the economies of Brazil, Russia and South Africa are driven largely by raw material exports, India and China -- the world’s second-largest economy -- are oriented more toward manufacturing and services. Brazil and India are also concerned over large trade deficits with China that critics say are supported by a deliberately undervalued yuan.
curtsy-AP and The Hindu
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