Bangladesh to pay $460m for BRICS bank membership

Bangladesh is very positive about joining the New Development Bank (NDB) established by BRICS states - Brazil, Russia, India, China and South Africa – that mobilise resources for infrastructure and development projects in emerging countries.

As part of the move, the Economic Relations Division (ERD) has sought the Finance Division’s opinion on Bangladesh joining the Delhi-based NDB.

An official of the Finance Division said the macroeconomic wing would provide an opinion based on the cost-benefit analysis of joining NDB.

Previously, the foreign ministry had sent a letter to the ERD seeking its opinion on joining the NDB. This, in turn, prompted the ERD to seek the Finance Division’s opinion.

By joining NDB, Bangladesh could be expected to subscribe to around $460 million in capital payable in seven annual instalments, according to a government document.

On November 19, the Indian High Commission in Dhaka sent a letter to the Bangladeshi foreign ministry asking if the country was interested in acquiring a membership of the NDB under the multinational development bank (MDB) membership expansion programme.

“Apart from the founding member, an Economically More Developed Country’s [EMDC’s] share at NDB will be determined by its economic size relative to the combined size of all other EMDCs,” the letter read.

Indian Prime Minister Narendra Modi in a virtual summit with Bangladesh Prime Minister Sheikh Hasina five days ago also invited Bangladesh to join the bank.

For Bangladesh, the initial voting power is likely to be higher than that at a global MDB like World Bank and close to the voting power at regional MDBs like the Asian Infrastructure Investment Bank and the Asian Development Bank.

As a member Bangladesh will be able to appoint one governor and one alternate governor of NDB. The country will also be represented on the board of directors by one elected director.

The letter also mentioned that the NDB leverages its AA+ international credit ratings from both Fitch and S&P, which are higher than the sovereign credit ratings of all its members, to raise funding in both hard and local currencies at low costs and provide loans to its members at very competitive rates.

According to NDB rules, in terms of voting power, the following restrictions will apply: the voting power of founding members cannot fall below 55%; that of non-borrowing members cannot exceed 20%; and voting power of non-founding members cannot exceed 7%.

Till now, the NDB has approved more than 50 projects worth more than $15 billion within BRICS countries — Brazil, Russia, India, China and South Africa.

The concept for setting up of the bank was proposed by India at the 4th BRICS summit in 2012 held in Delhi; the creation of a new development bank was the main theme of the meeting.

BRICS leaders agreed to set up a development bank at the 5th BRICS summit held in Durban, South Africa on March 2013.

Finally, on July 15, 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the BRICS states signed the agreement on the New Development Bank (NDB), which made provisions for the legal basis of the bank.

In a separate agreement, a reserve currency pool worth $100 billion was set up by BRICS nations.

The 7th BRICS summit in July 2015 marked the entry into force of the agreement on the New Development Bank.