BRICS Impact on Global Financial Institutions


Impact on Global Financial Institutions

Over the past few decades, the influence of these BRICS nations on the global economic landscape has grown significantly. This influence is evident in various ways, ranging from the restructuring of global economic power to the creation of new financing mechanisms and efforts toward dedollarization.

BRICS nations have been working towards reforming global financial institutions and establishing alternatives that can provide a counterbalance to the traditionally Western-dominated financial order, particularly the International Monetary Fund (IMF) and the World Bank.

The impact of BRICS on global financial institutions is complex and evolving. While BRICS has not yet overturned the existing global financial system, it has successfully highlighted the need for reform and diversity in international finance. Through institutions like the NDB and CRA, it has begun to offer alternative avenues for development financing, and it continues to explore ways to reduce Western dominance in the global financial architecture. As BRICS countries continue to grow, their collective economic weight and coordinated policies have the potential to bring significant changes to the global financial landscape.


The cooperative

BRICS countries collectively represent about 42% of the world’s population and roughly 23% of the gross world product. The impact of BRICS on global financial institutions can be discussed on several levels:

Call for Reform Within Existing Institutions:
BRICS nations have been lobbying for increased representation and voting rights within the IMF and World Bank to reflect their growing economic importance. This push has challenged the status quo and led to incremental reforms. For example, in 2010, the IMF agreed to a set of governance reforms that included a shift in quota resources to dynamic emerging markets and developing countries. 

Creation of New Financial Structures:
Unsatisfied with the pace of reform in global financial governance, BRICS has taken steps towards the creation of its own institutions, notably the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). The NDB, established in 2014, aims to fund infrastructure and sustainable development projects in BRICS countries and other emerging economies. The CRA, on the other hand, is a framework for providing protection against global liquidity pressures, including currency issues.

Influence on Development Financing:
The BRICS nations, with their own development bank, are able to provide an alternative source of funding for large infrastructure projects without the conditions often attached to IMF or World Bank funding. This has implications for the operational standards and conditionalities set by existing global financial institutions. Countries now have more options for development loans, which can lead to more competitive terms.

Challenging the Dollar Hegemony:
BRICS has also sought to challenge the US dollar’s dominance as the global reserve currency. Discussions among BRICS members have included the possibility of using their own currencies for trade between them, which could reduce reliance on the dollar and potentially undermine its position. While such efforts have not yet made a significant dent in the dollar’s status as the world’s primary reserve currency, they are indicative of BRICS countries’ desire to shift the financial power balance.

Geopolitical Implications:
The solidarity among emerging economies through BRICS can be seen as a geopolitical move that may give these countries more leverage in international dealings. As these countries continue to grow economically and seek a greater voice in global affairs, their collective action through BRICS will likely play a significant role in their efforts to reshape global financial governance.

Impact on Global Economic Stability:
The growing significance of BRICS economies in the global market introduces new dynamics in the global financial system. While this can lead to more diversified sources of global economic growth, there are also concerns regarding the stability and cohesion among BRICS members due to their varied political systems, economic structures, and strategic interests. Coordination and unity among BRICS in times of global financial crises could be tested.

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