Russia is creating a $100B rival to the IMF

Russia Russian President Vladimir Putin IMF Managing Director International Monetary Fund Christine LagardeRamil Sitdikov/Host Photo Agency via Getty ImagesRussian President Vladimir Putin (L) and Managing Director of the International Monetary Fund Christine Lagarde shake hands during an official welcome of G20 heads of state and government, heads of invited states and international organisations at the G20 summit on September 5, 2013 in St. Petersburg, Russia.

Moscow (AFP) – Russian President Vladimir Putin ratified an accord Saturday to set up a $US100-billion reserve fund for the so-called BRICS — the five leading emerging economies that include Russia, China, Brazil, India and South Africa.

Moscow is expected to contribute $US18 billion to the reserve, well behind the $US41 billion China has promised to pour into the fund that was set up after an agreement signed in July 2014 in Brazil.

The emerging economies also plan to form their own international bank based in Shanghai to challenge western dominance over international money markets.

“The accord on the creation of a common reserve fund for BRICS countries has been ratified,” a document from the Kremlin quoted by RIA Novosti news agency said.

The fund is meant to shield the BRICS against “short-term liquidity pressures” and promote greater cooperation between the five member countries.

Russia — which has suffered huge currency fluctuations since the outbreak of the crisis in Ukraine — sees the fund as an alternative to international financial institutions like the IMF and World Bank that are dominated by the United States.

The BRICS countries between them account for 40 per cent of the world’s population, and a fifth of the planet’s GDP.

NOW WATCH: Here’s the most looked-up word in the Merriam-Webster dictionary

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.