In tackling and resolving some of the Global South’s exigent demands, I believe there is untapped potential in the BRICS-created Contingent Reserve Arrangement (CRA). With the support of the heads of state of the member countries, political decisions could be made about CRA that may provide short-term resolution to a currently pressing economic issue in many countries.

Importance and contradictions of CRA

In 2014, the Fortaleza (Brazil) Summit established both the New Development Bank and the decree creating CRA. While the so-called “BRICS Bank” was conceived as an alternative to the World Bank, the CRA aimed to become an alternative to the IMF. CRA endeavours to guarantee emergency aid to the BRICS countries in case of liquidity problems in their international reserves. In other words, if a country finds itself with a low level of foreign currency reserves (in reality, dollars), which poses a short-term risk to its international trade operations or the payment of its debt services, CRA provides for the disbursement of the necessary resources to avoid the suspension of its international trade or even a default on foreign debt services.

It is a US$ 100 billion fund, the contribution of which is divided as follows: 41 per cent from China, 18 per cent from Russia, Brazil, and India, and 5 per cent from South Africa. Each country’s voting power corresponds to the weight of its financial contribution so not one country alone has veto power – as is the case with the US in the IMF. Under the agreement, the money remains in the respective central banks and is withdrawn on request through currency swaps between the dollars in the reserves of the provider countries and the local currency of the requesting country.

It’s a fundamental agreement because the shortage of international reserves has been the material basis for the IMF’s perverse actions in the economies of the Global South in recent decades. But it carries a contradiction: the five BRICS countries that created it have substantial international reserves, and it is doubtful that they will need to access the fund in the short or medium term. Thus, the fund has existed for nine years and has never been used.

On the other hand – and as always – numerous countries in the Global South are currently dependent on IMF loans, including Ghana, Sri Lanka, Pakistan, Argentina, and Kenya, whose population has been massively protesting for weeks against a tax increase demanded by the fund. The conditionalities of these loans follow the same neoliberal cantilena of fiscal austerity of recent decades: cutting social spending and further opening up their markets to international private capital (from the Global North), a recipe that has already devastated countless national economies.

There are even two new BRICS members in this situation: Ethiopia and Egypt, the latter of which, as well as being a BRICS member, is also a member of the NDB, which has another member, Bangladesh, in the same situation.

Ethiopia declared a default on its debt services in December 2023 (US$ 31 million) and is being pressured by the Paris Club to guarantee a US$ 3.5 billion loan with the IMF as a condition for suspending debt service payments for 2025. Analysts say that the IMF must impose a currency devaluation on the country and the privatisation of part of the banking and telecommunications sectors. In other words, Ethiopia will devalue its assets and then sell them to foreigners. A classic example of a “debt trap”.

Egypt finds itself in a similar situation. It requested a $5bn extension from the IMF (after requesting $3bn in December 2022), which was confirmed in March 2024. The Fund’s conditions are the devaluation of the Egyptian pound, the cancellation of any exchange control mechanism, monetary and fiscal rigidity, cutting social spending for the poorest, and an end to state incentives for state-owned companies.

A BRICS’s bold bet needs a political decision

Now, let’s imagine: instead of requesting resources from the IMF and being forced to submit to the Washington fund’s conditionalities, these countries – which are already members of BRICS and/or the NDB – could access the Contingent Reserve Arrangement. Instead of calling Kristalina Georgieva, they call Dilma Rousseff. Instead of submitting to the IMF’s debt trap, they seek economic adjustment solutions within the BRICS framework, the aim of which would be to prioritise the interests of the Ethiopian, Egyptian, and Bangladeshi economies and people and not the interests of Wall Street or the City of London.

Is this too idealistic a proposal for a monetary fund that currently has $100 billion and could grow with contributions from new members with robust international reserve liquidity, such as Saudi Arabia and the UAE? I don’t think so. Around 10% of the fund’s resources would solve Ethiopia and Egypt’s emergency. However, for this to happen, another obstacle in the CRA statute still needs to be revised. Currently, if a CRA member country requests resources from the fund, only 30% can be authorised sovereignly by the BRICS countries. The other 70% must be authorised by…the IMF!

In other words, an “alternative” monetary fund to the IMF has been created, but it needs the IMF’s blessing to be used. It’s ironic, but it demonstrates what Sergei Glazyev said recently when referring to the NDB, which also applies to CRA: “The problem is that the NDB works according to the status of the dollar.

They need to reorganise this institution to make it viable”. It’s understandable, as both were created in a different context than today’s, in which we had yet to experience such a sharpening of the contradictions between the imperialist powers and the global majority. But history demands a change.

Ultimately, this is a political decision by the BRICS heads of state. Saving some of its members from the classic “debt traps” imposed by the IMF would be a historic political victory for the Global South, which could demonstrate, in practice, the potential of cooperation in BRICS. Who knows, maybe in the future, the CRA will be extended to more countries in the South.

The bailout for countries facing international reserve liquidity problems is only an emergency measure, which doesn’t solve the structural problems of the unequal relations between the countries of the Global North and South within the global capitalist system. Nor does it solve the serious problem of the debt owed by the countries of the Global South to multilateral financial institutions and private banks in the US and Europe. For this to happen, it will be necessary to move forward with different strategies that tackle the bottlenecks to development in Latin America, Africa, and Asia. It may also involve a significant global debate on cancelling part of the Global South’s debt. However, BRICS needs concrete achievements, and the Contingent Reserve Arrangement may be our lowest-hanging fruit.

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