• Saudi Arabia’s government is in talks to join the  New Development Bank (NDB).
• Rousseff, NDB president, said they aim to raise local currency loans from 22% to 30%.

According to recent developments, the Saudi Arabia government is currently in talks to join the  New Development Bank (NDB), previously known as the BRICS Development Bank, which would make it the group’s ninth member, as per a press report by the Financial Times.

The NDB’s headquarters in Shanghai was created by the BRICS countries (Brazil, Russia, India, China, and South Africa). 

The talks are taking place as the NDB gets ready to assess its funding opportunities during its upcoming annual meeting, which begins on Tuesday. The British newspaper pointed out that these considerations are influenced by the penalties imposed on Russia due to its invasion of Ukraine. said the NDB officials.

“In the Middle East, we attach great importance to the Kingdom of Saudi Arabia and are currently engaged in a qualified dialogue with them,”

However, the representatives from Riyadh were unavailable for remarks. On the one hand, including Saudi Arabia will strengthen its connections with the world’s fastest-growing economies. It would also provide the BRICS bank access to capital from the second-largest global oil production.

The possibilities for fundraising, according to Ashwani Muthoo, director-general of the NDB’s independent assessment office, are. “the most important thing” at the moment.“We are struggling to mobilize resources,” he further added. While Muthoo refrained from commenting on the NDB’s discussions with Saudi Arabia, he mentioned that his department is currently examining “alternative instruments and currencies” to increase the bank’s revenues.

In 2015, the NDB was established by the five BRICS countries to provide an alternative to Western-dominated financial institutions of a similar nature. Since its inception, the bank has provided approximately $33 billion in loans to nearly 100 development initiatives and has welcomed the United Arab Emirates, Egypt, and Bangladesh as new members.

BRICS Bank to Offer More Loans in Local Currencies

During the annual meeting of the New development bank, which was held on Tuesday, Dilma Rousseff said that the bank aims to increase the proportion of loans provided in local currencies from the current 22 percent to 30 percent. Additionally, the bank seeks to fund more initiatives in local money in an effort to mitigate exchange rate volatility. Currently, the bank mostly uses US dollars for financial purposes.

When addressing the media, Rousseff said, “We need to create a diversified global currency system … In the future, it is unlikely that one single currency can dominate the world’s currency system. We will see more local currencies used to settle trade.” The president’s remark regarding local currency financing was made during increased geopolitical tensions due to Russia’s invasion of Ukraine and strained relations between Western countries and China.

Serious concerns have arisen due to the NDB’s reliance on Russia, which possesses a 19% stake in the bank. The bank’s credit score was lowered from double-A plus to double-A by the rating company Fitch in July of last year. The agency warned that the bank’s accessibility to the United States dollar bond market might be restricted due to “reputational risk.”Consequently, the New development bank was compelled to suspend its Russia exposure, which amounted to $1.7 billion or 6.7% of its overall assets, and cease funding for new projects in Russia.

In a recent interview with the Chinese news outlet CGTN, Rousseff provided insight by stating:

“ It is necessary to find ways to avoid foreign exchange risk and other issues, such as being dependent on a single currency, such as the U.S. dollar.”