At a summit in the Russian city of Ufa on Thursday, heads of state from Brazil, Russia, India, China and South Africa said a new development bank with an estimated start capital of $50 billion (45 billion euros) would begin financing projects as early as next year.

The initiative has taken three years to cobble together, with protracted negotiations on funding, the location of the bank's headquarters and personnel issues.

Russian President Vladimir Putin said he saw the bank - dubbed the New Development Bank - as an alternative to international financing institutions like the World Bank and the International Monetary Fund, both of which are dominated by the United States.

A currency pool

A second element of the group's plans to counterbalance the Western-dominated financial system includes a pool of currency reserves, worth $100 billion, which was also announced on Thursday.

For Russia, which has seen its access to Western funding cut off completely since it annexed the Crimean peninsula from Ukraine in March 2014, the launch of the bank and the currency pool had been key priorities. At the summit, Putin lamented what he perceived as the accumulation of sovereign debt by "a number of countries."

"These imbalances affect the growth rate and our economies," Putin said. "In these circumstances, the BRICS states intend to actively use their own resources and internal resources for development."

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The development bank would start lending next year to finance large-scale infrastructure projects, according to Putin. The bank's initial starting capital of $50 billion would eventually be doubled within the next few years.

"The New (Development) Bank will help finance joint, large-scale projects in transport and energy infrastructure, [as well as] industrial development," Putin said.

Obstacles to growth

The BRICS countries make up 40 percent of the world's population and account for about a fifth of global economic output. But their attempts to provide a counterweight to Western-dominated financing have been complicated in recent years.

Russia and Brazil, with their massive deposits of raw materials, have watched as global demand for their exports has waned. The price of oil - a central pillar of the Russian economy - has tanked since the beginning of this year.

Brazil is still reeling from a massive corruption scandal over its energy company Petrobras, which accounts for around 10 percent of Brazil's annual economic output. Russia's currency, the ruble, is also in the midst of a crisis as international sanctions over Moscow's role in the Ukrainian civil war take effect.

Meanwhile, South Africa has been hindered by an energy crisis and a national crime wave. In China, Beijing's ability to maintain market stability were tested in recent days as stocks crashed and the government was forced to intervene, which it did successfully but at a high cost.

With that in mind, summit participants agreed to coordinate their efforts to keep their respective economies stable.

cjc/pad (Reuters, AFP)