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Development financing from Bric nations to LICs to rise: IMF

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The financial contribution of towards development activities in (LICs) has seen a sharp rise and the trend is expected to continue, says a working paper from the International Monetary Fund.

The working paper -- 'Determinants of Development Financing Flows from Brazil, Russia, India, and China to Low Income Countries' -- however added that the flow of such funds to least developed countries is uneven, with the more resource rich among them garnering a bigger share.

"Brics development financing flows have increased significantly and are expected to become more prominent in the post-crisis era," it added.

The working paper, however, does not necessarily reflect the views of the IMF, the agency said.

According to the World Bank data, loan commitments from the Bric group of major emerging economies stood at $26 billion during the 2000-08 period, with China contributing the lion's share.

This is, however, far lower than the $296 billion committed by donors from the Organisation for Economic Cooperation and Development (OECD) during the same period.

"In contrast with many industrial countries which are facing large fiscal consolidation and consequent challenges to meet their aid commitments, Brics are in a strong position to continue increasing their development financing. Brics have brought new dynamics to the international aid architecture," the working paper said.

However, financial commitments from the Bric nations to low income countries depends on issues like governance and geographic factors.

"Brics lend more to LICs with weaker institutions. Land-locked, resource-scarce LICs receive significantly less financing than other resource-rich LICs," the working paper said, adding that lending decisions were driven by commercial factors.

It added that countries that export more to Brics tend to get less concessional financing terms.

"While this may seem puzzling, these results could reflect Brics offering better conditions in order to access new markets to satisfy their growing import needs.

"Countries that have more Bric are likely to receive lower concessionality, (which) suggests that LICs need to carefully assess the financing provided to ensure that the risks are fully taken into account," it said.

Bhutan, Angola and Tajikistan received the highest loan financing from the Bric nations during 2000-08.

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