Global financial bodies must reform – Ramaphosa

Global financial institutions must reform if they are to be responsive to the challenges borne by developing countries, said President Cyril Ramaphosa at the Brics Summit on Tuesday.

“We require a fundamental reform of the global financial institutions so they can be more agile and responsive to the challenges facing developing economies,” he said.

Ramaphosa was speaking in a leader’s address alongside other Brics heads of state at the summit.

Global financial institutions such as the World Bank and the International Monetary Fund (IMF) have often come to the aid of developing countries, but often at a steep cost and with complex conditions attached.

“In this respect, the New Development Bank, established by Brics countries in 2015, is leading the way,” Ramaphosa said.

He said since its formation, the New Development Bank (NDB) or the official Brics bank, had displayed an ability to mobilise resources for infrastructure and sustainable development in emerging economies and without conditions.

The bank has been in existence for nearly a decade. It was formed with the intention of providing financing to developing nations for much-needed infrastructure projects that would boost economic growth.

It has been viewed as an alternative to the likes of the IMF. Ramaphosa also emphasised that economic growth must be underpinned by inclusiveness.

The Brics nations – Brazil, Russia, India, China and South Africa – have seen foreign investment in their bloc grow four-fold over the past 20 years.

They contribute 32% to the world’s GDP and aim to reach 50% by 2030. In contrast, the GDP contribution of the G7 nations – Canada, France, Germany, Italy, Japan, the UK and the US – has dropped to 30.7% and has effectively been strong-armed by Brics.

Speaking about the Brics bloc outpacing the G7, Brazil’s President Luiz Inácio Lula da Silva said developing nations would be the driving force of global economic growth in coming years.

“We have surpassed the G7 in purchasing power parity, indicating that emerging and developing markets are the ones that will show the highest growth rate in the coming years,” he said.

He lamented the unmet financial needs of developing nations, which he said remained due to a lack of substantial reform from traditional financial institutions.

He added that the Brics bank should be a global leader in financing projects that address the most pressing challenges facing countries.