The US admits that IMF’s gross neglect of India and China is why the BRICS bank was created

The emerging economies like India, China and Brazil were neglected by the International Monetary Fund (IMF) and had no say in policies matters. So they came up with their own multilateral financial institution named BRICS bank.

The US has now acknowledged that the creation of BRICS bank is a result of the failure of reform of the IMF, where India, China and Brazil have negligible voice.

During his US visit in June, Union Finance Minister Arun Jaitley had attributed the emergence of new multilateral financial institutions to the failure of reforms in IMF and the World Bank.

"We do believe that these new institutions...this bank or the BRICS bank...these institutions are all coming up...the analysis in India has been the reforms within World Bank and the IMF has prolonged a bit too long. As a result of which these alternative institutions are coming up," Jaitley had said in his appearance at the Stanford University in California.

Nathan Sheets, the Under Secretary of Treasury for International Affairs, has accepted that due to the veto power of the US, the reforms of the IMF decided way back in 2010 to reflect the growing importance of major emerging markets in the global economy have not taken place.
In 2010, IMF had agreed on a set of quota and governance reforms giving more voice and say in the decision making process to countries like China, India and Brazil. But this has not been realized so far as the US Congress has not approved it.

These reforms were designed to strengthen the finances of the IMF and give a greater voice to emerging markets, such as Brazil, China, India and Mexico, while preserving the US veto by a comfortable margin, Sheets said during a Congressional hearing.

He said: "As the largest shareholder and the only member with veto power over major IMF decisions, our extended delay in approving the 2010 IMF quota and governance reforms has led our partners to question our commitment to the multilateral system."

"Some countries have pursued their interests in other ways, including by creating new institutions in which the United States has no voice, such as the New Development Bank (known as the BRICS bank) and the Asian Infrastructure Investment Bank (AIIB)," Sheets said.

(Image: Reuters)