BRICS New Development Bank Considering Ruble Bonds
April 21, 2017
The BRICS New Development Bank President Kundapur Vaman Kamath said late last week that the bank is considering raising funds through issuing Ruble denominated bonds.
Kamath stated “We are looking with great interest at the local Russian currency. Last year, our team held negotiations in Russia with financial regulators. We discussed the possibilities of raising funds in the local currency through the bond issue denominated in rubles. The response was positive and now our teams are studying this possibility. We expect to work on this issue during this year but it is early yet to give the time frame of entering the Russian market.”
Ruble bonds and the currency are becoming attractive as Russia moves out of recession and away from the impact of Western sanctions. The Ruble was one of the worlds best performing currencies in 2016, gaining some 17% against the US Dollar. The proportion of foreign buyers of Russian federal loan (OFZ) bonds also grew last year from 5% to 27%. Russian stock markets have also been recovering – the ruble-trade MICEX index has also been performing well, hitting an all-time high at the end of January this year.
The BRICS New Development Bank shareholders include Brazil, Russia, India, China and South Africa. While the bank is not especially aligned with financing Silk Road or OBOR projects, some of the financing it has been arranging are within the silk road sphere of influence. The bank is headquartered in Shanghai, and has an initial authorized capital of USD100 billion, of which 50% has been paid up. Its remit is financing infrastructural and sustainable development projects in the grouping’s member states, as well as in developing countries.
To date it has financed projects in all member countries, to a value of about USD1.5 billion last year. These have included investments in renewable solar and wind power in Brazil, hydro-power plants in Siberian Russia, upgrading roads in the Indian state of Madhya Pradesh, renewable energy in Canara, India, wind power in Fujian, China, renewable solar energy in Shanghai, and renewable energy transmission systems in South Africa.
A further fifteen projects are under consideration for 2017, including two projects in Russia which are expected to be approved within the next three weeks. The bank is committed to green energy financing, as can be seen from part of its mission statement concerning environmental and social sustainability.