BRICS to commit $100 billion to FX fund, completion a way off

Thu Sep 5, 2013 2:10pm EDT
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By Lidia Kelly and Alessandra Prentice

ST. PETERSBURG, Russia (Reuters) - The BRICS emerging economies will set up a $100 billion fund to steady currency markets, Russia's Vladimir Putin said on Thursday, but it looks unlikely to be in place soon enough to temper the effects of an expected pullback of U.S. monetary stimulus.

China, holder of the world's largest foreign exchange reserves, will contribute the bulk of the currency pool. But officials said it would not be functional for some time yet.

Cheap dollars that fueled a boom in Brazil, Russia, India, China and South Africa over the past decade have turned tail since Ben Bernanke, chairman of the Federal Reserve, warned in May of a 'taper' in the U.S. bond-buying scheme.

"The initiative to establish a BRICS currency reserve pool is at its final stage," president Putin said in opening remarks to a meeting of BRICS leaders during a Group of 20 summit in Russia's second city, St. Petersburg. "Its capital volume has been agreed at $100 billion."

At the meeting of BRICS leaders, China committed $41 billion; Brazil, India and Russia $18 billion each; and South Africa $5 billion.

One BRICS official said the technical details could be sorted out by the time the group meets next March but even after that, it will only become operational after ratification by each country's parliament.

Earlier, both Chinese Vice Finance Minister Zhu Guangyao and Russian Deputy Finance Minister Sergei Storchak said details still needed to be worked out.

"We have asked not to create unnecessary expectations," Storchak told Reuters. "Politically, the countries are ready, but technically they are not."   Continued...

Russia's President Vladimir Putin (R) meets with his Chinese counterpart Xi Jinping at the G20 Summit in Strelna near St. Petersburg, September 5, 2013. REUTERS/Alexander Nemenov/Pool