New Development Bank in Membership Talks with Saudi Arabia
The New Development Bank (NDB), established by the BRICS nations, is actively engaged in discussions with Saudi Arabia regarding the country's potential membership, according to a report by the Financial Times. As the NDB aims to expand its funding options and navigate the impact of sanctions on Russia, one of its founding shareholders, it is exploring the inclusion of Saudi Arabia. The annual meeting of the NDB, starting this week, will play a crucial role in evaluating its funding strategies and potential new members.
NDB Engages in a "Qualified Dialogue" with Saudi Arabia
The Financial Times report reveals that the NDB, often referred to as the "BRICS bank," is in a "qualified dialogue" with Saudi Arabia to explore membership possibilities. This development comes at a time when the NDB seeks to diversify its funding sources due to the ramifications of sanctions imposed on Russia following its actions in Ukraine.
“In the Middle East, we attach great importance to the Kingdom of Saudi Arabia and are currently engaged in a qualified dialogue with them,” the New Development Bank told the newspaper in a statement while Riyadh authorities were unavailable for comment.
If Saudi Arabia were to join the NDB, it would strengthen ties between the world's largest developing economies and provide the bank access to funds from the second-largest oil producer globally.
This move could alleviate concerns about the NDB's heavy reliance on Russia, which holds a 19% stake in the bank. Concerns over reputational risk had led to a credit rating downgrade by Fitch in July, affecting the NDB's access to the US dollar bond market.
Subsequently, the bank suspended funding for new Russian projects to ensure compliance with Western sanctions, which accounted for USD 1.7 billion, or 6.7% of its total assets. The move was intended to reassure investors about its compliance with Western sanctions on Moscow. In May of this year, the agency revised its outlook from “negative” to “stable,” noting the steps taken by the bank.
NDB Recognizes the Urgency of Diversifying Fundraising Options
The NDB recognizes the urgency of diversifying its fundraising options, with director-general Ashwani Muthoo stressing the importance of mobilizing resources. The bank aims to explore alternative instruments and currencies to expand its financial capabilities.
Established in 2015 by the BRICS nations (Brazil, Russia, India, China, and South Africa), the NDB was created to challenge the dominance of Western-led financial institutions. Over the years, the bank has extended loans of approximately USD 33 billion to nearly 100 development projects. In addition, it has welcomed the United Arab Emirates, Egypt, and Bangladesh as new members.
As the NDB evaluates its membership options and funding strategies during its annual meeting, the question arises: Will the BRICS development bank accept Saudi Arabia and potentially other nations as members in the future?
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