The BRICS Contingent Reserve Agreement (CRA) was established in 2014 to provide a safety net for member countries in times of economic tumult. BRICS is an acronym that stands for Brazil, Russia, India, China, and South Africa. These five countries are considered to be emerging economies with growing global influence.
The CRA is a pool of foreign currency reserves that member countries can draw upon in case of balance of payments difficulties. The CRA is authorized for up to $100 billion, and each member country contributes funds based on its economic size. China is the largest contributor to the CRA with $41 billion, followed by Brazil and Russia with $18 billion each, and India and South Africa with $18 billion combined.
The CRA is seen as a significant step towards creating a new global financial architecture that is more equitable and inclusive. It is also seen as a challenge to the dominance of the International Monetary Fund (IMF) and the World Bank. These institutions have been criticized for being dominated by Western countries and imposing policy conditions that are detrimental to the economic growth of developing countries.
The CRA provides an alternative source of financing for member countries during times of crisis. It also reduces their dependence on the IMF and the World Bank. The CRA is based on the principles of mutual assistance, equality, and respect for sovereignty. It also underscores the importance of cooperation among emerging economies in the global financial system.
The CRA was activated for the first time in 2018 when Argentina faced a balance of payments crisis. The CRA provided Argentina with $6 billion in financial assistance, which helped stabilize its economy. This was a significant moment for the CRA and demonstrated its effectiveness in providing financial support during times of crises.
In conclusion, the BRICS Contingent Reserve Agreement is an important development in the global financial system. It provides a safety net for member countries in times of economic turmoil and reduces their dependence on the IMF and the World Bank. The CRA also reinforces the importance of cooperation among emerging economies and highlights the need for a more inclusive and equitable global financial architecture.