Currency reserves are hoped to guard against financial shocks, while China has committed to contributing the "lion's share".
Leaders from Brazil, Russia, India, China and South Africa (Brics) have agreed to create a $100-billion pool of currency reserves to guard against financial shocks, China's Vice-Finance Minister Zhu Guangyao said.
“The scale of the reserve arrangement will be $100-billion and China will contribute the lion’s share of this,” Zhu told reporters on Thursday at the Group of 20 summit in St Petersburg, Russia.
Leaders from these five emerging market economies are also discussing the creation of a joint development bank that would invest in infrastructure, Zhu said. Political leaders may give further guidance on the bank’s mandate at an informal meeting this week, he said.
South Africa’s rand has depreciated 17.7% against the dollar this year, the most among 24 emerging-market currencies tracked by Bloomberg. India’s rupee was second worst, depreciating 16.9%, while the Chinese currency has strengthened by 1.8%.
“We see the temporary difficulties of some Brics countries mainly as difficulties in terms of international balance of payments,” Zhu said in translated remarks. “The policy options in response to such typical balance-of-payments difficulties include increasing interest rates or devaluing currencies.”
Instituting capital controls, as has been done in the past, is “out of the question” now, Zhu said. – Bloomberg