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New Development Bank's covid-19 lending push lauded by rating agency

Brics New Development Bank’s first non-sovereign project was a $200 million loan to Brazil’s Petrobras and the second a $200 million loan to South Africa’s Transnet to reconstruct a port in Durban. Photo: BloombergPremium
Brics New Development Bank’s first non-sovereign project was a $200 million loan to Brazil’s Petrobras and the second a $200 million loan to South Africa’s Transnet to reconstruct a port in Durban. Photo: Bloomberg

  • Over 2020, the bank announced programmes aggregating to $10 billion for its borrowers to aid in the battling of the pandemic and the support of economic recovery

MUMBAI: New Development Bank (NDB), a multilateral lending institution established by Brazil, Russia, India, China, and South Africa (BRICS) is gradually growing into its role of a countercyclical lender as exemplified through disbursements made despite the covid-19 pandemic, S&P Global Ratings said on Friday.

NDB was established with an international treaty signed in 2014 and headquartered in Shanghai, the bank started its operations in 2015. The institution’s mandate is to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies.

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The bank, the agency said, has responded strongly to the covid-19 related needs of its member countries, despite its short period of operations. Over 2020, the bank announced programmes aggregating to $10 billion for its borrowers to aid in the battling of the pandemic and the support of economic recovery. NDB also significantly ramped up its loan disbursements last year to $5.4 billion from $0.9 billion in 2019, more than double the target it had planned before the pandemic struck.

The rating agency affirmed its AA+ long-term and A-1+ short-term issuer credit ratings on the New Development Bank (NDB), with a stable outlook. It said the ratings reflect its opinion that NDB will establish itself as a catalyst in reducing the infrastructure deficits faced by its BRICS members.

“At the same time, we expect the institution to continue to instill sound governance and risk management principles across its operations. This expectation supports our assessment of NDB's very strong enterprise risk profile and extremely strong financial risk profile," it said.

On the other hand, due to the rapid acceleration in disbursements, NDB's risk-adjusted capital (RAC) ratio suffered a precipitous drop to 27.4% in 2020 from 44.8% the year before.

“We do not expect the RAC ratio to continue declining at such a pace. We envisage NDB's disbursements will revert to more sustainable levels as the global economy emerges from covid-19 in the next two years," it said.

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