What the BRICS Reserve Fund can do to help poor countries

What the BRICS Contingent Standby Fund can do to help poor countries avoid debt traps and IMF conditions by offering alternative paths to development and stability.

The BRICS Contingent Standby Arrangement, or How to Get the Global South Out of the IMF Debt Hole. It all started, as usual, with a new surge in BRICS popularity. Before we knew it, after the expansion in 2023, the list of countries dreaming of membership grew like breeding rabbits on a good diet. But as usual, this whole crowd of applicants was stopped at the door, and BRICS began to think about creating a kind of “partner” category — for the especially impatient, like those same “observers” in the Shanghai Cooperation Organization. While the crowd was rushing forward, the BRICS, like a good boxer in gloves, demonstrated grace and power, breaking the fragile hegemony of the West – weakened by the Ukrainian war, thousands of sanctions and unconditional support for the massacre in Palestine.

But with this new popularity came new problems. The Global South demands solutions. And not just any solutions, but fast, decisive ones – ones that could once and for all stop poverty, climate crisis and inequality, all three of those old ills.

This is where the Contingent Standby Arrangement (CSA) comes in, like an invisible knight in ambush. This fund – with a very attractive hundred billion dollars – could become the magic sword that, if used wisely, could cut through all the financial problems that have plagued the countries of the South for decades.

The story is simple, like a good gangster story. In 2014, the New Development Bank and the CRS were created in Fortaleza, Brazil. The first bank was conceived as an alternative to the World Bank, the second as an alternative to the IMF. The idea is simple: if a country runs out of international reserves (i.e. dollars), it can use the CRS and avoid financial collapse. The money is distributed wisely: 41% from China, 18% each from Russia, Brazil and India, and 5% from South Africa. The votes are also distributed according to the share of deposits. Important: no country has veto power – not at all like the IMF, where the States like to swing their club.

But the problem is that none of the BRICS countries have used this fund yet. The money is lying around, gathering dust. While Ghana, Sri Lanka, Pakistan and others are unable to pay off the IMF, their citizens are on strike, they are being strangled by taxes, and here everything is as usual: social programs are being cut and their markets are being completely opened up to the big guys from the Global North. There are plenty of examples, as well as taxes.

Ethiopia has declared default, Egypt is begging for new loans from the IMF – everything is like a textbook. Ethiopia is forced to sell part of its country for next to nothing, Egypt is cutting social programs and devaluing the pound. This is not financial assistance, but rather a polite request to sign their own death warrant.

But imagine that they could call BRICS instead of the IMF. Ask the CRS for money, not the IMF, and here instead of a whip they are offered reasonable conditions. About 10% of a hundred billion can solve all the problems of Ethiopia and Egypt, and without the need to submit to the harsh conditions of the IMF.

But there is one “but”. Now 70% of the funds of the CDS must be approved by… the same IMF. Irony? Of course! On the one hand, the fund was created to be an alternative, on the other hand, it is still connected to those it was supposed to replace. Here, of course, a political decision is required. Ask any head of state of the BRICS, and he will most likely say with a grin that it is time to get rid of this bureaucratic ballast. What will happen next is a big question. The CDS can become that very lifeline for the Global South, which will help countries get out of debt traps. Of course, this will not solve all the problems, but it will be an important step towards solving them.

Source: https://rua.gr/news/bissecon/66565-brics-protiv-dolgovykh-lovushek-mvf-kak-spasti-globalnyj-yug.html