The development bank set up by the BRICS bloc is negotiating with Saudi Arabia on accepting the country as a member, according to a press report. The talks come as the bank, created as an alternative to similar institutions led by the West, seeks to expand its funding options amid sanctions on one of its founding shareholders, Russia.
BRICS Development Bank Engaged in ‘Qualified Dialogue’ With Saudi Kingdom
The Shanghai-based New Development Bank (NDB), established by the BRICS nations (Brazil, Russia, India, China, and South Africa), is in talks with Saudi Arabia on admitting the country as a member, the Financial Times reported.
The negotiations come as the NDB prepares to evaluate its options to attract funding during its annual meeting starting on Tuesday, affected by the penalties imposed on Russia following its invasion of Ukraine, the British daily noted.
“In the Middle East, we attach great importance to the Kingdom of Saudi Arabia and are currently engaged in a qualified dialogue with them,” the New Development Bank told the newspaper in a statement while Riyadh officials were not available for comment.
Saudi Arabia’s accession would strengthen its ties with the world’s largest developing economies, on the one hand. And on the other, it would provide the ‘BRICS bank’ with access to funds from the world’s second-largest oil producer.
Dependence on Russia, which holds a 19% stake in the NDB, has been the cause of serious concerns. Last July, the rating agency Fitch downgraded the bank’s credit rating to double-A from double-A plus, warning that “reputational risk” could limit its access to the U.S. dollar bond market.
As a result, the NDB was forced to put on hold its Russia exposure of $1.7 billion, or 6.7% of its total assets, and halt funding new Russian projects. The move was intended to reassure investors about its compliance with Western sanctions on Moscow. In May of this year, the agency revised its outlook from “negative” to “stable,” noting the steps taken by the bank.
According to Ashwani Muthoo, director-general of the NDB’s independent evaluation office, fundraising options are “the most important thing” right now. “We are struggling to mobilize resources,” he said. Muthoo added that the board wants to examine alternative instruments and currencies.
The five BRICS countries founded the NDB in 2015 to challenge Western-dominated financial institutions of this kind. Since its establishment, the bank has lent around $33 billion to almost 100 development projects and admitted the United Arab Emirates, Egypt, and Bangladesh as members.
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