Eurasian Countries End SCO Interbank Association’s Year-long Operation with Approving Anti-pandemic Road Map and Joint Approaches for National Currencies

The Council of the Interbank Association of the Shanghai Cooperation Organisation (SCO IBA) held a meeting today in Moscow, discussing VEB.RF’s year-long presidency of the association. The year was a testing time for the SCO countries: they had to respond to the challenges of the coronavirus pandemic and deal with associated shocks to their economies. The SCO IBA transformed its operations in such a way as to meet the current challenges and help the development banks to become as useful as possible for their national governments in troubled times.

“Despite changes in our plans, we succeeded in giving new impetus to interbank cooperation,” VEB.RF Chairman Igor Shuvalov said. “The crises of 2008 and 2014 were caused by financial and economic factors. In 2020, the economy was hit by non-economic shocks of the COVID-19 pandemic and related restrictions. The components of the Shanghai Spirit—trust, equality, striving for mutual benefits and joint development—helped us to pass the test with flying colours and become stronger.” His opinion was shared by SCO Secretary-General Vladimir Norov, stating that “Russia’s presidency of the SCO this year involved continuous efforts to enable the SCO to play a more important role in regional governance, as well as enhancing the coordination of multi-purpose mechanisms, ensuring security and promoting economic and humanitarian cooperation.”

Deputy Prime Minister Alexei Overchuk noted that the SCO countries this year were helped by an understanding of the unity of goals and objectives shared by all member states. “We see great potential for the promotion of specific transport and logistics investment projects and for increased mutual trade flows. There are good prospects for joint industrial projects to develop the international division of labour and make our economies more efficient. Development institutions and banks have a key role in all these endeavours,” he said. “The road map approved today by the SCO development banks to cope with the repercussions of the pandemic is aimed at creating new growth points in the economy and stimulating trade and investment in the member states.”

The principal outcome of the SCO IBA’s work was the preparation and joint signing of two documents: the SCO IBA Road Map for coping with the repercussions of the pandemic for the organisation’s economies and the SCO IBA Joint Approaches to the wider use of national currencies within the SCO. “The road map, drawn up for the first time in the SCO IBA’s history, should contribute to creating new growth points, stimulate trade and investment,” Igor Shuvalov said, “and facilitate the exchange of best practices in coping with the repercussions of the pandemic. In August, as part of implementing the road map, we held a conference to discuss economic rescue, project financing and city development. We believe it’s the urban economy that can become an important factor in growth recovery. VEB.RF is ready to provide methodological support in this area, as well as in green financing and project structuring for public-private partnerships.”

As stated in the road map approved by the SCO IBA members, “the outbreak of the COVID-19 pandemic endangers the security of the peoples” of the SCO countries and prompted them to “facilitate effective interaction within the IBA, provide support for the fight against the epidemic, and take joint action to maintain cooperation and trade and restore production and economic activity for the benefit of the peoples of the Organisation’s countries”.

In accordance with the road map, the parties intend to be active in sharing their experience of crisis-fighting measures and support for companies, industries, small and medium-sized enterprises, and exports (Russian expertise is to be provided by VEB.RF’s subsidiary Russian Export Center), create a base of potential projects for joint investment, develop a mechanism and instruments for long-term lending to infrastructural projects with substantial outcomes related to the Sustainable Development Goals, stimulate the green finance market and give particular attention to projects contributing towards the UN Sustainable Development Goals. SCO IBA initiatives are to be publicly available on special new pages of the SCO website.

The other document is the SCO IBA Joint Approaches to the wider use of national currencies within the SCO. As specified in the document, “based on the Shanghai Spirit and acting on the principles of mutual trust, mutual benefits, equality and striving for joint development”, the development banks of the association’s countries agreed to pay more attention to the use of national currencies. The parties acknowledge the importance of expanded lending in national currencies and their priority in implementing joint projects and “consider it reasonable to combine forces to establish mechanisms for mutual access to liquidity in national currencies”.

The development banks of the SCO countries “consider it reasonable to create the conditions for encouraging payments in national currencies between foreign trade entities of the SCO member states and ensure a gradual transition to payments in national currencies” and “recognise the importance of the SCO countries studying the interaction between various financial messaging systems and the SWIFT network in order to improve the reliability of payments”.

According to Alexei Overchuk, the SCO countries have achieved significant improvement in the use of national currencies in recent years. “The document initiated by VEB.RF, namely the Joint Approaches to the wider use of national currencies within the SCO, is of paramount importance in resolving this issue. VEB.RF conducts transactions in Chinese yuan, and we think our experience will be useful. For its part, Russia is promoting payments in Russian rubles, and we are pleased to enable all our partners to use our infrastructure. Equally importantly, the Central Bank of Russia has set up a new payment system to settle financial transactions. I mean the financial messaging system. During VEB.RF’s presidency of the SCO IBA, the Uzbek National Bank acceded to the association. Requests for accession were received from two more partner banks. This proves the system is now developing,” he said.

“We welcome the fact that the SCO IBA is active in expanding the practice of lending in national currencies and in giving priority to the use of national currencies in multilateral projects within the association,” Vladimir Norov said. “It is, therefore, our opinion that support should be given to the draft of the Joint Approaches to the wider use of national currencies within the SCO.”

Along with Igor Shuvalov and Alexei Overchuk, the SCO IBA meeting was attended by Vladimir Norov, SCO Secretary-General; Padmanabhan Raja Jaishankar, Managing Director, India Infrastructure Finance Company; Abay Sarkulov, Chairman of the Management Board, Development Bank of Kazakhstan; Zhao Huan, Chairman, China Development Bank; Azizbek Omorkulov, Chairman of the Board, RSK Bank of Kyrgyzstan; Sultan Ali Allana, Chairman, Habib Bank Limited; Sirojiddin Salom Ikromi, Chairman of the Board, Amonatbonk State Savings Bank of Tajikistan; and Alisher Mirsoatov, Chairman of the Board, National Bank of the Republic of Uzbekistan for Foreign Economic Activity. The foreign participants attended the meeting of the SCO IBA Council via videoconferencing.