TWN Info Service on Finance and Development (Oct24/01)
29 October 2024
Third World Network

BRICS: Urgent need for reform of international financial architecture
Published in SUNS #10106 dated 29 October 2024

Penang, 28 Oct (Kanaga Raja) — The leaders of the expanded BRICS group of countries, meeting in Kazan, the Russian Federation, on 22-24 October, for the 16th BRICS Summit, underscored “the need to reform the current international financial architecture to meet the global financial challenges including global economic governance, to make the international financial architecture more inclusive and just.”

In their Kazan Declaration, recalling the 2023 Johannesburg II Declaration, the BRICS leaders reiterated their strong belief that multilateral cooperation is essential to limit the risks stemming from geopolitical and geo- economic fragmentation and commit to intensify efforts in areas of mutual interest, including but not limited to, trade, poverty and hunger reduction, sustainable development, including access to energy, water and food, fuel, fertilizers as well as mitigating and adapting to the impact of climate change, education, and health, including pandemic prevention, preparedness and response.

They emphasized the importance of the full implementation of Addis-Ababa Action Agenda adopted at the Third International Conference on Financing for Development in 2015 and the effective participation of developing countries in the Fourth International Conference on Financing for Development, which will be held in Spain from 30 June to 3 July 2025.

“We call on the developed countries to honor their commitment to financing for development and encourage their cooperation with developing countries in different development areas including taxation, debt, trade, official development assistance, technology transfer and reforming of international financial architecture.”

The leaders underscored the need to reform the current international financial architecture to meet the global financial challenges including global economic governance to make the international financial architecture more inclusive and just.

“We note that high debt levels in some countries reduce the fiscal space needed to address ongoing development challenges aggravated by spillover effects from external shocks, particularly from fluctuations in financial and monetary policies in some advanced economies as well as the inherent problems with the international financial architecture. High interest rates and tighter financing conditions worsen debt vulnerabilities in many countries.”

The leaders believe it is necessary to address the international debt properly and in a holistic manner to support economic recovery and sustainable development, taking into account each nation’s laws and internal procedures, accompanied by sustainable external debt and fiscal prudence.

“We recognise the need to address in an effective, comprehensive and systematic manner the debt vulnerabilities of both low and middle income countries.”

The leaders said one of the instruments, amongst others, to collectively address debt vulnerabilities is through predictable, orderly, timely and coordinated implementation of the G20 Common Framework for Debt Treatment with the participation of official bilateral creditors, private creditors and Multilateral Development Banks (MDBs) in line with the principle of joint action and fair burden-sharing.

“We recognise the key role of the New Development Bank (NDB) in promoting infrastructure and sustainable development of its member countries.”

In this regard, the leaders supported further development of the NDB and improvement in corporate governance and operational effectiveness towards the fulfillment of the NDB’s General Strategy for 2022-2026.

They supported the NDB in continuously expanding local currency financing and strengthening innovation in investment and financing tools.

“We encourage the Bank to follow member-led and demand-driven principles, the employment of innovative financing mechanisms to mobilize financing from diversified sources, and in this regard, we acknowledge the initiative to create new investment platform to leverage the existing institutional infrastructure of the NDB to boost the investment flow into the countries of BRICS and the Global South mechanisms.”

The leaders supported the enhancement of capacity building and knowledge exchange, including by building synergies with knowledge sources from developing countries, the assistance of member countries in achieving the SDGs and the further improvement of efficiency and effectiveness to fulfill its mandate, aiming to be a premier multilateral development institution for EMDCs.

“We agree to jointly develop the New Development Bank into a new type of MDB in the 21st century,” they said.

The leaders urged the Bank to execute its purpose and functions in accordance with the Articles of Agreement of the New Development Bank in a fair and non-discriminatory manner.

“We support the further expansion of NDB membership and expedited consideration of applications of BRICS countries in line with the NDB General Strategy and related policies.”

The leaders welcomed the BRICS Interbank Cooperation Mechanism (ICM) focus on facilitating and expanding innovative financial practices and approaches for projects and programmes, including finding acceptable mechanisms of financing in local currencies.

They also welcomed a continued dialogue between the ICM and the NDB.

“We recognise the important role of BRICS countries working together to deal with risks and challenges to the world economy in achieving global recovery and sustainable development.”

In this regard, the leaders reaffirmed their commitment to enhance macro-economic policy coordination, deepen economic cooperation and work to realize strong, sustainable, balanced and inclusive economic recovery.

“We emphasize the importance of continued implementation of the Strategy for BRICS Economic Partnership 2025 in all relevant ministerial tracks and working groups.”

The leaders reiterated their commitment to enhancing financial cooperation within BRICS.

“We recognise the widespread benefits of faster, low cost, more efficient, transparent, safe and inclusive cross- border payment instruments built upon the principle of minimizing trade barriers and non-discriminatory access.”

The leaders welcomed the use of local currencies in financial transactions between BRICS countries and their trading partners.

“We encourage strengthening of correspondent banking networks within BRICS and enabling settlements in local currencies in line with BRICS Cross-Border Payments Initiative (BCBPI), which is voluntary and non-binding, and look forward to further discussions in this area, including in the BRICS Payment Task Force.”

The leaders acknowledged the importance of exploring the feasibility of connecting BRICS countries’ financial markets infrastructure.

In this regard, they agreed to discuss and study the feasibility of establishment of an independent cross-border settlement and depositary infrastructure, BRICS Clear, an initiative to complement the existing financial market infrastructure, as well as BRICS independent reinsurance capacity, including BRICS (Re)Insurance Company, with participation on a voluntary basis.

“We task our Finance Ministers and Central Bank Governors, as appropriate, to continue consideration of the issue of local currencies, payment instruments and platforms and report back to us by the next Presidency.”

The leaders recognised the BRICS Contingent Reserve Arrangement (CRA) being an important mechanism to forestall short-term balance of payments pressures and further strengthen financial stability.

They expressed their strong support for the CRA mechanism improvement via envisaging alternative eligible currencies and welcomed finalization of the amendments to the CRA documents.

“We acknowledge the successful completion of the 7th CRA Test Run and the fifth edition of the BRICS Economic Bulletin under the title “BRICS Economies in a Higher-rate Environment”.”

OPEN SUPPLY CHAINS

The BRICS leaders highlighted that secure, resilient, stable, effective and open supply chains are crucial for sustainable development.

Acknowledging the role of the BRICS Members as the world’s largest producers of natural resources, the leaders underscored the importance of strengthening cooperation of the BRICS Members across the entire value chain and agreed to take joint actions with the aim to oppose unilateral protectionist measures that are inconsistent with the existing WTO provisions.

Concerned with the fast-paced digitalization process of all aspects of human life in the 21st century, the BRICS leaders underscored the key role of data for development and the need to intensify the engagement within BRICS to address this issue.

“We highlight that fair, inclusive and equitable governance of data is critical to enable developing countries to harness the benefits of the digital economy and emerging technologies, including artificial intelligence.”

The BRICS leaders called for the design of a fair and equitable global framework for data governance, including cross-border data flows, to address the principles of collection, storage, use and transfer of data; ensure the interoperability of data policy frameworks at all levels; and distribute the monetary and non-monetary benefits of data with developing countries.

The leaders emphasized that e-commerce has become an important driver of global economic growth, fostering international trade in goods and services, ensuring foreign investment flows and facilitating innovation.

“We are resolved to further increase trust in e-commerce and ensure full-fledged protection of the rights of e-commerce parties, by intensifying cooperation in the realms of utilizing digital technologies for consumer rights protection, exploring online dispute resolution tools and creating enabling environment for businesses to enter global markets, exchanging views on the issue of small value product trade through the cross-border e-commerce,” they said.

They agreed that resilience of supply chains and unimpeded trade in agriculture along with domestic production are crucial for ensuring food security and livelihoods, especially for low-income or resource-poor farmers, as well as for net-food importing developing countries.

“We recognise efforts to support smallholder farmers as an important part of national agriculture system. We welcome the Conference on Food Security and Sustainable Agricultural Development held on 27-28 of June 2024 in Moscow, and look forward to the upcoming Global Food Security Summit that would be held in Abu Dhabi on 26-28 November 2024.”

The leaders reaffirmed the need to develop a fair agricultural trading system and implement resilient and sustainable agriculture.

“We commit to minimize disruptions and promote rules-based trade in agriculture and fertilizers with the view to ensure a continuous flow of food and essential inputs for agricultural production which should be exempted from undue restrictive economic measures, inconsistent with WTO rules, including those affecting producers and exporters of agricultural products as well as business services with regard to international shipments.”

In this regard, the leaders welcomed the initiative of the Russian side to establish a grain (commodities) trading platform within BRICS (the BRICS Grain Exchange) and to subsequently develop it including expanding it to other agricultural sectors.

The leaders acknowledged that the Partnership for the New Industrial Revolution (PartNIR) serves as a guiding platform for BRICS cooperation within the framework of the New Industrial Revolution to identify interests, challenges, and opportunities in the rapidly evolving industrial landscape and capacity building in the field of industry as well as ensure the continuity of BRICS industrial cooperation in a structured framework for sustained collaboration.

While emphasising the fundamental role of access to energy in achieving SDGs and noting the outlined risks to energy security, the leaders highlighted the need for enhanced cooperation among the BRICS countries as major producers and consumers of energy products and services towards fair, inclusive, sustainable, equitable and just energy transitions.

“We believe that energy security, access and energy transitions are important and need to be balanced taking into consideration full and effective implementation of the UNFCCC and its Paris Agreement.”

The leaders reaffirmed their determination to foster free, open, fair, non-discriminatory, transparent, inclusive, and predictable international energy trade and investment environment and agreed to deepen technological cooperation.

“We stress the necessity for resilient global supply chains and stable, predictable energy demand in order to provide universal access to affordable, reliable, sustainable and modern energy sources as well as to ensure national, global and regional energy security.”

In this regard, they also strongly condemned all terrorist attacks against critical cross-border energy infrastructure and called for an open and unbiased approach to investigating such incidents.

“We call for allocating adequate, predictable and accessible finance from developed to developing countries for the just energy transitions, in line with the principles of CBDR-RC.”

The leaders stressed that new industrial development models associated with energy transitions would require enormous investments in existing and new infrastructure.

“We reject unilateral, punitive and discriminatory protectionist measures, that are not in line with international law, under the pretext of environmental concerns, such as unilateral and discriminatory carbon border adjustment mechanisms (CBAMs), due diligence requirements, taxes and other measures and reconfirm our full support for the call in COP28 related to avoidance of unilateral trade measures based on climate or environment.”

The leaders also opposed unilateral protectionist measures, which deliberately disrupt the global supply and production chains and distort competition.

“We underscore the critical need for active climate adaptation projects, moving beyond research and forecasting to the implementation of practical solutions, advancing renewable energy, sustainable financing, low-emission technologies, and sustainable development investments, while highlighting the importance of collective action and international cooperation to address the adverse impacts of climate change and ensure inclusive, equitable climate initiatives,” said the leaders.

PUBLIC HEALTH ISSUES

The BRICS leaders reiterated their support to the central coordinating role of the World Health Organization in the implementation of multilateral international efforts to protect public health from infectious diseases and epidemics and committed to reform and strengthen the international pandemic prevention, preparedness and response system.

They recognised the fundamental role of primary health care as a key foundation for Universal Health Care and health system’s resilience, as well as on prevention and response to health emergencies.

“We welcome fostering closer ties among BRICS health institutions responsible for sanitary and epidemiological health and well-being, prevention, preparedness and response to epidemic prone communicable diseases and health impact following disasters and encourage further exploring opportunities for knowledge sharing, exchange of expertise and undertaking joint projects in the health sector.”

The BRICS leaders acknowledged that BRICS cooperation on countering Tuberculosis (TB) and Antimicrobial Resistance (AMR) as well as strengthening capacities in preventing communicable diseases and other health issues such as non-communicable diseases, research and development, experience sharing, including on traditional medicine systems, digital health, nuclear medicine and radiopharmaceutical science, with a particular emphasis on strengthening the radiopharmaceutical supply chain and enhancing isotopes production, alongside fostering the development of advance digital solutions, greatly contributes to relevant international efforts.

“We support the initiatives of the BRICS R&D Vaccine Center, further development of the BRICS Integrated Early Warning System for preventing mass infectious diseases risks and the operations of the BRICS TB Research Network.”

The leaders welcomed the outcomes of the 79th United Nations General Assembly (UNGA) High-Level Meeting on AMR, committing to a clear set of targets and actions, including reducing the estimated 4.95 million human deaths associated with bacterial antimicrobial resistance (AMR) annually by 10% by 2030.

“We express concern about the growing threat of AMR to all sectors of the economy, in particular healthcare, and note the timeliness of holding the first BRICS Conference on AMR in May 2024.”

TAX COOPERATION

The BRICS leaders welcomed the UN General Assembly resolution 78/230 on promotion of inclusive and effective international tax cooperation at the United Nations.

“We express our appreciation for the commitment and dedication in developing the Terms of Reference for a United Nations Framework Convention on International Tax Cooperation (UNFCITC) by the UN Ad Hoc Committee.”

The leaders recognised the critical importance of developing the UNFCITC with its early Protocols to strengthen international tax cooperation and make it fully inclusive and more effective.

The BRICS leaders expect that the implementation of the UNFCITC will promote an inclusive, fair, transparent, efficient, equitable, and effective international tax system for sustainable development, with a view to enhancing the legitimacy, certainty, resilience, and fairness of international tax rules, while addressing challenges to strengthen domestic resource mobilization.

The leaders supported initiatives to enhance tax cooperation and build a more progressive, stable, and effective international tax system, promoting tax transparency and facilitating discussions on effective taxation of high net-worth individuals. +