Yellen argues with GOP senator over IMF aid to poor countries | News on the coronavirus pandemic
Treasury Secretary Janet Yellen faces fierce Republican opposition for supporting a major increase in funding for the International Monetary Fund’s efforts to help poor countries cope with the global pandemic.
In a difficult exchange on Wednesday at a Senate Banking Committee hearing, GOP Senator John Kennedy said the influx of additional liquidity would direct American taxpayer money to American adversaries like China, Russia and Venezuela.
“You say you want to help poor countries, but you and I both know that only about 10% of that will go to poor countries,” with much of the money going into the hands of countries that United States thinks bad. , Kennedy said – without specifying the source of his estimate.
The fund announced on Tuesday that it aims for member countries to support an additional $ 650 billion in reserve funds, known as Special Drawing Rights, or SDRs, to help low-income countries cope with the Covid-19 pandemic. Yellen last month overturned a Trump administration stance against the new funding, and the Group of Seven nations have already weighed in with their support.
Kennedy said American taxpayers will have to pay $ 180 billion for this increased allocation. Yellen replied that it would not cost taxpayers much, although the United States could issue treasury bills to finance its support to the IMF measure.
The senator interrupted by shouting: “I rest my case!” to which Yellen raised his voice and said, “I’m sorry!” adding that the US involvement will be “essentially a washout” because of the interest earned on converting funds for other nations.
Kennedy replied, “No disrespect, but I think you are wrong. I think we’re going to have to borrow the $ 180 billion of that amount. “
“I don’t know where you got a number like that from,” she said.
“When China comes in and trades its SDRs and says, ‘We want dollars’, where do you think we’re going to get that money?” Kennedy asked Yellen. “We’re going to borrow it.”
The exchange ended with Kennedy and Yellen agreeing to speak by phone.
The tiff illustrates how the Republican opposition grows stronger as the IMF prepares to strike a deal to expand its reserve holdings for the first time since 2009.
Such a move requires the consent of the United States as the major shareholder of the IMF, but not specifically of Congress, as the proposed amount is below an approval threshold of around $ 680 billion.
Yellen will need to provide lawmakers with just 90 days’ notice of an official vote supporting the move. Since Democrats hold a slim majority in the Senate and generally support the IMF’s reserve plan, Republicans face an uphill battle to counter it.
The IMF allocates SDRs based on the fund’s share. This means that 58% of new SDRs would go to advanced economies, 42% to emerging and developing economies – and only 3.2% to the smallest subset of low-income countries.
Proponents of increasing reserves say there is still more than $ 20 billion for the poorest countries, like Zambia and Chad, which have been in such a hurry that they have already asked to rework their debt. with the Group of 20.
During Wednesday’s hearing, Republican Senator Pat Toomey of Pennsylvania also lobbied Yellen on the issue, raising concerns that China is not being transparent about its use.
Yellen told Toomey, “Many countries have indicated their willingness to recycle the SDRs they receive as loans or grants to low-income countries,” which will amplify the impact of the funding.
A spokeswoman for the Treasury declined to provide further details on which countries have made such commitments.
Also on Wednesday, Republican Senator Marco Rubio of Florida released a statement urging the Biden administration to reject IMF funding.
“There is absolutely no reason to use American taxpayers’ money to make the submission of Xi Jinping, who is committing genocide against the Uyghurs and persecuting the pro-democracy movement in Hong Kong,” he said. said, referring to the Chinese president.
One concern raised by GOP Representative French Hill in a separate House hearing on Tuesday was the fund’s credit potential to be used to repay China’s “predatory loans” as part of its Belt and Road initiative.
“We want to make sure that SDR allocations are used” by the poorest countries to “meet real needs, and we will work with them and with China to ensure that they do not repay their loans under the Belt and Road initiative. Yellen said in response to a question from Hill.