Robert Zoellick, the outgoing president of the World Bank, has backed the creation of a Brics bank, saying the need for such an institution highlights the dangers of existing multilateral organisations failing to mobilise sufficient resources to support large developing countries.
Mr Zoellick warned that pushing middle-income countries, such as China and Brazil, out of the World Bank system and forcing them to look for resources elsewhere would be a “mistake of historic proportions”.
He told the Financial Times in an interview that the World Bank would support a Brics bank, formally proposed last week at a summit in New Delhi, as it had done with the Islamic Development Bank and the Opec Fund to build financing and analytical capabilities.
If Brics nations “decide they want another financing vehicle – fine. Let’s figure out how to work with it ... I’m enough of an economist that I’m not a monopolist,” Mr Zoellick said.
“India wants the money. China wants to be seen as a good partner and may want to internationalise the renminbi ... Brazil wants to be associated with the concept and maybe it can connect [its own] Development Bank.”
The Brics bank was the headline item at a meeting in the Indian capital last week between Manmohan Singh, the Indian prime minister, and leaders Hu Jintao of China, Dilma Rousseff of Brazil, Dmitry Medvedev of Russia and Jacob Zuma of South Africa.
The meeting was the first step towards creating an emerging market bank. It comes as Brics leaders demand greater financing support from the World Bank for infrastructure development and are critical of the International Monetary Fund for not giving greater representation to developing countries.
Mr Zoellick’s endorsement will be a boost to a proposal that top Indian officials described as one of the best opportunities for the diverse five-nation grouping to show that it had substance and shared vision.
An aide to Mr Singh said India was not fearful of China mobilising its reserves to help other emerging markets, including its own, and had strongly encouraged Beijing’s participation in the Brics bank.
Mr Zoellick said the desire by India, China, Brazil and Russia for a new financing vehicle was a stark reminder of the consequences of the World Bank reducing its engagement with middle-income countries in preference for poorer nations.
“If the World Bank cannot continue on the path I’ve tried to [take it] to be a good partner for India [and the middle-income countries], they will go elsewhere,” he warned.
“There is a view in some quarters in developed countries that the Bank should work with the poorest countries and not with developing countries. I’m an adamant opponent of that view ... If you believe in a multilateral system then India and Brazil are going to become more important over time and we need to draw from their knowledge and, in time, their finances.”
On a visit to New Delhi on Friday, Mr Zoellick met Indian officials to “stretch the envelope” by extending more credit at concessional rates to the World Bank’s largest borrower. In total, India has loans worth about $42 billion from the World Bank group.
He said he was trying to ensure that momentum to finance India’s infrastructure was not lost during a race between US nominee Jim Yong Kim, Ngozi Okonjo-Iweala, Nigeria’s finance minister, and José Antonio Ocampo, Colombia’s finance minister, to be the new World Bank chief.
“I had to fight this fight and my successor will have to fight. If we make progress with middle income countries we will make progress with the poorest countries,” Mr Zoellick said.