Leaders of the world’s biggest economies grappled with fallout from potential stimulus exit as the BRICS countries said they will create a $100 billion pool of currency reserves to guard against financial shocks. China will contribute $41 billion to the pool, with Russia, India and Brazil each adding $18 billion and South Africa providing $5 billion, according to a statement issued today at the Group of 20 summit in St. Petersburg, Russia. An exit from monetary-easing policies poses a major challenge for the world economy, Chinese Vice Finance Minister Zhu Guangyao told reporters today as the two-day forum opened.
Emerging markets, which helped pull the world out of a recession after the global financial crisis, now face an exodus of cash and sliding currencies in anticipation of the U.S. Federal Reserve’s eventual tapering of its $85 billion in monthly bond purchases in its most recent quantitative easing program. The prospect of U.S. military strikes against Syria is also adding volatility as investors gauge whether oil flows from the region will be disrupted.
“The tapering of QE will dominate the agenda,” Victor Bark, who oversees about $2.8 billion as the head of asset management at Alfa Capital in Moscow, said by phone. “The U.S. won’t look at the situation in emerging markets — they’ll act based on their own interests.”
Developed economies are turning into global growth engines as some emerging-market counterparts decelerate, the International Monetary Fund said in a report for G-20 leaders.
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