September 6, 2013 - 14:36 AMT
PanARMENIAN.Net - Leaders of the BRICS group of nations - Brazil, Russia, India, China and South Africa - have said they will set up a $100bn fund to guard against financial shocks, BBC News reported.
The Brics leaders said the details of the fund were still being worked out.
"The initiative to establish a BRICS currency reserve pool is at its final stage," Russian President Vladimir Putin said during the G20 summit in St Petersburg. "Its capital volume has been agreed at $100bn."
“The reserve fund is being established in order to promptly react to the situation on currency markets,” Russian Deputy Finance Minister Sergei Storchak said, adding that central banks will be able to conduct swap operations if necessary.
The chairman of the U.S. Federal Reserve, Ben Bernanke, said in May that the U.S. might start to rein back on its $85bn-a-month bond-buying program, which was introduced with the aim of increasing liquidity in the markets after the global financial crisis. Part of the increased cash has flowed into emerging markets, helping to lift asset prices there.
But Bernanke's statement, coupled with a recovery in the U.S. economy, has seen investors pull out money from these economies.
The latest move to establish the fund is being seen an attempt by BRICS nations to tackle any potential volatile movements in their currencies. China will contribute $41bn to the pool, with Brazil, India and Russia putting in $18bn each and South Africa $5bn.
Earlier this year, BRICS nations discussed the formation of a new development bank to fund infrastructure and development projects throughout the developing nations.
On Thursday, the leaders of Brazil, Russia, China, India and South Africa agreed to establish the bloc’s development fund with a capital of $50 billion and a reserve fund of $100 billion.