New Development Bank to Expand Use of Local Currencies

Rousseff made the remarks at the opening ceremony on the second day of the 9th NDB Annual Meeting, held under the theme of "Investing in a Sustainable Future" on Aug. 29-31 in Cape Town, the legislative capital of South Africa.

In her speech, Rousseff emphasized that emerging markets and developing countries face significant challenges in achieving sustainable development. "For us, a just transition requires a huge amount of resources and long-term financing," she said.

Rousseff, however, noted that it seems unlikely to mobilize more investments to sustainable development without tackling the issue of indebtedness, which has become an excessive burden for developing countries.

For that, according to her, two actions need to be put in place: first, it is necessary to channel the international liquidity to developing countries and reduce the burden of high interest rates; second, develop alternatives, such as local currency financing, to increase fiscal space for investment.

"The use of local currency is, therefore, one strategic option," said the NDB president. "By promoting transactions in local currencies, we also facilitate investment growth, helping governments and the private sector overcome the cash flow mismatch between projects and financing. This approach provides greater predictability and reduces the high costs associated with hedging needs."

"That is why expanding the use of local currencies is one of the NDB's key strategic objectives for the 2022-2026 period," Rousseff said. "The bank is putting in place local currency sustainable development-oriented platforms and recognizes the urgency of making green financing available to the member countries. Therefore, it aims to provide 30 percent of total financing in the local currencies of borrowing members."

At the end of the opening ceremony, the NDB signed a 5-billion-rand (about 281.5 million U.S. dollars) loan agreement with Transnet, the South African state logistics company, to "support the modernization and improvement of South Africa's freight rail sector."

BRICS is the acronym for an emerging-market cooperative mechanism that includes Brazil, Russia, India, China, and South Africa. Established in 2015 by BRICS countries and headquartered in Shanghai, the NDB is a multilateral development bank aimed at mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging market economies as well as developing countries.

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