The US has acknowledged that the creation of new multilateral financial institutions like BRICS bank is a result of the failure of reform of the International Monetary Fund (IMF), where emerging economies like India, China and Brazil have negligible voice.
Because of 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, Nathan Sheets, the Under Secretary of Treasury for International Affairs, said.
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 realised so far as the US Congress has not approved it.
"These reforms are designed to strengthen the finances of the IMF and give a greater voice to dynamic emerging markets, such as Brazil, China, India and Mexico, while preserving the US veto by a comfortable margin," Sheets said during a Congressional hearing.
"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," he said.
"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.
In June, during a US visit 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.