Saudi Arabia is in discussions to join the Shanghai-based New Development Bank (NDB), which was founded by the BRICS countries of Brazil, Russia, India, China, and South Africa, according to the Financial Times.
The conversations take place as the NDB gets ready to assess its options for raising money during its annual conference, which begins on Tuesday and is impacted by the sanctions against Russia as a result of its invasion of Ukraine, the British newspaper observed.
Membership Negotiations
Although Riyadh authorities were unavailable for comment, the New Development Bank stated in a statement that it places great emphasis on Saudi Arabia in the Middle East and is now engaged in a qualified discussion with them.
On the one hand, Saudi Arabia’s membership would boost its links with the biggest developing economies in the world. On the other hand, it would grant the ‘BRICS bank access to funds from the second-largest oil producer in the world.
- Saudi Arabia is to join the BRICS-founded NDB.
- The NDB is assessing its options for raising money during its annual conference.
- New Development Bank focusing on Saudi Arabia in the Middle East.
Dependency on Russia, which owns a 19% interest in the NDB, has raised significant red flags. The bank‘s credit rating was reduced to double-A from double-A plus by rating agency Fitch in July, with a warning that “reputational risk” would restrict its access to the U.S. dollar bond market.
As a result, the NDB was compelled to stop supporting new Russian projects and suspend its $1.7 billion (or 6.7% of its total assets) exposure to Russia. The action aimed to reassure investors that Moscow was in compliance with Western sanctions. The agency changed its outlook in May of this year from “negative” to “stable,” taking into account the bank’s actions.
The NDB’s independent assessment office’s director-general, Ashwani Muthoo, calls fundraising opportunities “the most important thing” at the moment. We are having problems mobilizing resources, he said. The board wants to look at alternate instruments and currencies, Muthoo noted.
The NDB was established by the five BRICS nations in 2015 to compete with these types of Western-dominated financial institutions. The bank has admitted Bangladesh, the United Arab Emirates, Egypt, and $33 billion in loans to nearly 100 development projects since it was founded.
