Image Credits: FT
The BRICS New Development Bank (NDB), which is a bank formed by countries like Brazil, Russia, India, China, and South Africa, has just introduced its very first set of bonds in South African Rand (ZAR). These bonds are worth 1.5 billion rand, which is about $78 million in dollars. This news was announced on Wednesday and reported by the media.
This move comes as the NDB is under pressure to increase its efforts to raise money and provide loans in local currencies. This was talked about in a report from Reuters. It’s interesting because this is the first time the NDB is issuing bonds in a local currency that isn’t from China, where the bank is based.
The NDB shared more information in a press release. They said, “A lot of investors showed interest, with offers totaling more than R2.5 billion for both the 3-year and 5-year parts of the bonds. This allowed the NDB to choose to make the transaction bigger, from R1 billion to R1.5 billion. Most of the interest came from big investors, about 71%, while local banks also bought a part of the bonds.”
A person named Leslie Maasdorp, who is the Vice-President and Chief Financial Officer of the NDB, said that the bank wants to be more active in the local financial markets of its member countries. This will help the bank get money to support projects like building infrastructure and promoting sustainable development in South Africa. This is like a model for how the NDB plans to release more bonds in the future.
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The New Development Bank started in 2015 to let the member countries from BRICS have more control over how they finance development. The Finance Minister of South Africa, Enoch Godongwana, has mentioned that he’s worried because the bank hasn’t given out loans in local currencies.
The upcoming BRICS summit that will happen from August 22 to 24 in Johannesburg will include talks about using the national currencies of the member countries more. Maasdorp said in an interview that the NDB wants to increase the amount of loans they give out in local currencies to about 30%, but there are some challenges when it comes to depending less on the US dollar. So far, most of the loans the NDB has given were in Chinese yuan.
