The BRICS Contingent Reserve Arrangement (CRA) is a framework for the provision of support through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures. It was established in 2015 by the

BRICS BRICS is an intergovernmental organization comprising ten countriesBrazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates. The idea of a BRICS-like group can be traced back to Russian foreign ...

countries: Brazil, Russia, India, China and South Africa. The legal basis is formed by the ''Treaty for the Establishment of a BRICS Contingent Reserve Arrangement'', signed in

Fortaleza Fortaleza ( ; ; ) is the state capital of Ceará, located in Northeast Region, Brazil, Northeastern Brazil. It is Brazil's 4th largest city—Fortaleza surpassed Salvador, Bahia, Salvador in 2022 census with a population of slightly over 2.4 mi ...

, Brazil, on 15 July 2014. It entered into force upon ratification by all BRICS states, announced at the 7th BRICS summit in July 2015. The objective of this reserve is to provide protection against global liquidity pressures. This includes currency issues where members' national currencies are being adversely affected by global financial pressures. The CRA is generally seen as a competitor to the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...

(IMF) and along with the

New Development Bank The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS nations (Brazil, Russia, India, China, and South Africa). According to the agreement, "the bank shal ...

is viewed as an example of increasing

South South is one of the cardinal directions or compass points. The direction is the opposite of north and is perpendicular to both west and east. Etymology The word ''south'' comes from Old English ''sūþ'', from earlier Proto-Germanic ''*sunþa ...

-South cooperation. The CRA's "liquidity instrument" is the central bank liquidity swap. When a borrowing country ("Requesting Party") requests to draw funds, the central banks of the other countries ("Providing Parties") agree to sell and repurchase U.S. dollars with the borrowing country's central bank. Both the spot and forward legs of the swap are executed at the spot rate, however the borrowing country must pay a predetermined interest rate in dollars to the lending countries. The capital of $100 billion is distributed as follows: The maximum access states can request from the Arrangement is half (China) to twice (South Africa) the amount of capital contributed. The arrangement is scheduled to start lending in 2016.

References

{{BRICS

External links

Text of the Arrangement
BRICS International finance institutions 21st century in economic history

See also

References

External links