BRICs’ philosophies for development financing and their implications for LICs

BRICs’ philosophies for development financing and their implications for LICs

Flows of development financing from the BRICs (Brazil, Russia, India and China) to low income countries (LICs) have surged in recent years. Unlike aid from traditional donors, BRICs (excluding Russia) view their financing as primarily based on the principles of South-South cooperation, focusing on mutual benefits without attachment of policy conditionality. This paper provides an overview of the philosophies and modalities of BRIC financing and examines their implications for LIC economies and future LIC-BRIC engagement. The paper concludes that to maximize the benefits of LIC-BRIC cooperation, LICs will need to ensure high returns for BRIC-financed projects through sound public investment management. LICs and BRICs can work together to improve the transparency of project financing. This, together with a sound debt management strategy, would help minimize the debt-distress risks of increased borrowing.

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