Russian President Vladimir Putin has ratified an agreement to establishment a $100 billion foreign currency reserve pool for the group of BRICs emerging economies, according to a document published Saturday on Russia’s official legal information site.
On Wednesday the deal was ratified by Russia’s upper house of Parliament, the Federation Council. The currency pool, called the Contingent Reserve Arrangement (CRA), will primarily support the balance of payments of the BRICs member states, according to the deputy head of the Federal Council Committee for Budget and Financial Markets Sergey Ivanov.
“Realization of the agreement will also contribute to the effective protection of the national currencies against the volatility in the world currency markets,” Ivanov said.
“In perspective, the cooperation of the BRICs member states in reforming the international monetary and financial system will remain a priority which is aimed at creating a stable and predictable system of international currencies…,” he added.
The reserve pool will allow for BRICs member states to urgently replenish their liquidity in different proportions to resolve problems with their balance of payments.
China is set to provide the largest share with a $41 billion contribution to the pool, while Russia, Brazil, and India will provide $18 billion each. South Africa is set to chip in the remaining $5 billion.
In July 2014 the BRICs grouping of emerging economies — which comprises of Brazil, Russia, India, China, and South Africa — signed a document to form the reserve currency pool worth over $100 billion as well as the $100 billion New Development Bank (NDB), also known as the BRICs bank.
The BRICs bank will be used to finance infrastructure projects in the BRICs countries as well as other emerging market countries.
The launch of the BRICs bank is seen as a first step to break the dominance of the U.S. dollar in global trade, as well as dollar-backed institutions like the IMF and the World Bank, both U.S.-based institutions that BRICs countries have had little influence within.
The BRICs bank has been rumored to begin operations in July.
The BRICs group represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP, and 30 percent of the world’s GDP based on PPP. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total.