'BRICS bank' looks to local currencies as Russia sanctions bite

BRICS countries set up New Development Bank (NDB) to widen influence, but sanctions against Russia have hindered its ambition. NDB needs to increase local currency fundraising and lending to de-risk foreign exchange fluctuations.

Hobbled by the impact of sanctions against founding shareholder Russia, the New Development Bank (NDB) set up by the BRICS countries needs to increase its local currency fundraising and lending, South Africa's Finance Minister told Reuters.

South Africa will host leaders of the other BRICS nations - Brazil, Russia, India and China - as the bloc aims to widen its influence at a Johannesburg summit later this month.

Finance Minister Enoch Godongwana said boosting local currency usage among the NDB's members will also be on the agenda, with the aim of de-risking the impact of foreign exchange fluctuations rather than de-dollarisation.

The greenback has gained against emerging market currencies since Russia invaded Ukraine and the Federal Reserve began raising interest rates to fight inflation in early 2022, making dollar debt more costly for those countries to service.

"Most countries that are members of the NDB have been encouraging (it) to provide loans in local currencies," Mr. Godongwana said.

Established in 2015 as the flagship financial project of the bloc, the NDB's ambition to serve emerging economies and de-dollarise finance have been curbed by economic realities and Moscow's invasion of Ukraine.

"(It is) not doing as much as member countries require, but that is the strategic direction we are pushing the bank (in)," Mr. Godongwana said in a telephone interview last week.