In recent years, the Global South has increasingly questioned the actions and influence of major international financial institutions such as the World Bank and the International Monetary Fund (IMF). Critics argue that these institutions often act as instruments of Western interests, using their financial power as a “Trojan horse” to impose conditions favorable to developed nations on vulnerable sovereign states. This perception has led many developing countries to call for significant reforms within these institutions, as well as within the United Nations Security Council (UNSC), which they believe perpetuates inequities in global governance.
Despite the growing discontent and calls for change, tangible progress towards reforming these massive financial entities remains indefinable. Many nations in the Global South find themselves trapped in a cycle of dependency, where the promise of financial assistance comes with strings attached conditions that often prioritize the interests of the lenders over the needs of the borrowing nations. This ongoing struggle highlights a critical gap between the aspirations of developing countries and the actions of established financial institutions.
In light of these challenges, many countries in the Global South are actively seeking alternative financial partners to support their development agendas. Recently, the BRICS+ Development Bank has emerged as a feasible option for those disappointed with the policies and preconditions of classical international financial institutions. Comprising Brazil, Russia, India, China, and South Africa, along with several other nations, the BRICS+ bloc offers a platform for collaboration that emphasizes mutual support rather than conditionality.
The New Development Bank (NDB), established by BRICS+, is garnering attention among countries looking for financial relief. According to NDB its mission focuses on priorities infrastructure and sustainable development projects that propel economic growth and improve the lives of people among member countries.
It is known that funding infrastructure projects which are critical for the economic development of many nations in the Global South. By prioritizing infrastructure development, the NDB aims to alleviate the financial burdens faced by these countries, enabling them to pursue growth without the constraints typically imposed by Western-dominated financial institutions.
As the Global South continues to advocate for reform and seek alternative funding sources, the conversation around financial sovereignty becomes increasingly pertinent. The rise of institutions like the BRICS+ Development Bank signals a potential shift in the global financial landscape, one that may allow developing countries to assert greater control over their economic futures.
In an exclusive interview with The Ethiopian Herald Dawit Mezegebe, a lecturer at Dilla University and a Ph.D. candidate at the Centre for African and Asian Studies at Addis Ababa University says that the New Development Bank, founded in 2014, represents a significant departure from the Bretton Woods institutions established in 1944, such as the World Bank and the International Bank for Reconstruction and Development (IBRD),” he explains. “The primary focus of the NDB is on infrastructure development, addressing issues related to the green economy, and fostering balanced growth among member states. Importantly, it aligns with the Sustainable Development Goals (SDGs), which were discussed at a conference held in Ethiopia in 2015.”
With a capital base exceeding 100 billion dollars, the NDB stands in stark contrast to the IMF and World Bank, which have historically operated under a system influenced heavily by Western powers. “The BRICS nations China, Russia, India, Brazil, and South Africa boast significant foreign reserves, allowing them to provide financial support without the imposition of Western ideologies,” Dawit notes.
He emphasizes that the NDB does not impose the same conditionalities that are typical of the IMF and World Bank, such as macroeconomic reforms or adherence to specific political ideologies.
One of the defining features of the NDB is its commitment to multilateralism. Dawit asserts that the BRICS framework promotes equitable relationships among member states, avoiding the “one-size-fits-all” approach of traditional institutions. “The NDB fosters a collaborative environment, enabling countries to support one another while minimizing the dominance of Western financial systems,” he explains.
Furthermore, he highlights the Contingent Reserve Arrangement (CRA) as a critical component of the NDB’s strategy, providing liquidity during financial crises without preconditions. “This is a major difference from the IMF and World Bank, which often impose strict guidelines that can undermine a country’s sovereignty,” he states.
Regarding the potential for the NDB to interfere in member states’ internal affairs, Dawit is clear: “BRICS does not impose its will on member countries. It aims to create a balanced global development platform, respecting the sovereignty of states and their right to self-determination.”
He also discusses the strategic advantages for developing countries like Ethiopia in accessing funding from the NDB. “The NDB allows for transactions in local currencies, reducing dependency on Western financial systems and promoting economic sovereignty. This is essential for countries looking to enhance their economic resilience.”
As for the future of collaboration between the NDB, IMF, and World Bank, Dawit advises caution and strategic diplomacy. “Countries must assess which institution offers the most beneficial terms for their specific needs. Economic diplomacy is crucial in navigating these relationships. For instance, while the NDB may be suitable for certain infrastructure projects, the IMF could be tapped for emergency support if necessary.”
In conclusion, Dawit sees the NDB as a transformative force in the global financial landscape. “By offering an alternative to traditional Western-dominated institutions, the NDB provides developing countries with the opportunity to pursue growth on their own terms, free from the constraints of neo-colonial economic policies.” He emphasizes that the future of global economics lies in a multipolar world where nations can choose partnerships that best serve their interests.
Overall, the path forward for the Global South involves not only seeking alternatives to existing financial institutions but also uniting in their calls for reform and greater representation in global financial governance. As they navigate these complex dynamics, these countries must leverage their collective strength to forge a new narrative one that prioritizes their needs and aspirations in the face of a rapidly changing world.
It is recalled that the 16th BRICS Summit was held in Kazan, Russia, with Ethiopia participating for the first time as a member. According to the Press Secretariat of the Office of the Prime Minister, Prime Minister Abiy Ahmed actively participated in the summit and engaged in successful bilateral and multilateral discussions.
In his speech, he called for reform of the global financial system and advocated for permanent African representation on the UN Security Council. These issues have been consistently raised by the Prime Minister in various international forums. During bilateral discussions on the sidelines of the summit, he conveyed Ethiopia’s positions to leaders of BRICS members and interested countries.
BY EYUEL KIFLU
THE ETHIOPIAN HERALD THURSDAY 7 NOVEMBER 2024
