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U.S. Treasury's Yellen says Congress needs to fund debt relief programs

EconomyJun 10, 2021 05:28PM ET
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© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks during a news conference, after attending the G7 finance ministers meeting, at Winfield House in London, Britain June 5, 2021. Justin Tallis/Pool via REUTERS

By David Lawder

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen told lawmakers on Thursday that debt relief for poor and developing countries would be hampered without new funding, while $2.7 billion in current unmet U.S. commitments to the World Bank, International Monetary Fund and other institutions would grow.

Yellen, in prepared remarks to a U.S. House of Representatives Appropriations subcommittee, said that the G20 Debt Service Suspension Initiative for poor countries and a new debt restructuring "Common Framework" both need funding from Congress.

"Without new funding, the United States could be forced to delay the multilateral debt process under the Common Framework and charge much higher interest rates on DSSI debt service suspensions," Yellen said.

Yellen said the Treasury's budget request for fiscal 2022 includes funding for these initiatives as well as U.S. contribution commitments to international financial institutions, such as the World Bank's International Development Association fund for the poorest countries.

She said the budget plan also includes funding for the first-ever U.S. contribution to the IMF's Poverty Reduction and Growth Trust, a fund that aids poor countries. It also would allow the United States to lend IMF Special Drawing Rights (SDRs) through the trust to poorer countries that need them.

The IMF is working on a $650 billion distribution of foreign exchange assets in the form of SDRs, the IMF's unit of exchange, to all of its members later this year. To spend those SDRs, recipients would need to exchange them for the underlying hard currency with a willing country.

Yellen was questioned by Republican Representative Guy Reschenthaler about whether the IMF SDR issuance would benefit U.S. adversaries, including China, Russia and Iran.

Yellen said that these countries would be allocated SDRs as IMF members. China and Russia would be unlikely to want to spend them, while Iran, facing widespread international sanctions, would be unlikely to find a willing source of exchange.

Asked if Myanmar, where the military seized power in February, would use its SDRs, she said: "No, Burma will not be able to use its SDRs. When a government has taken power by force, the IMF will not transact with it, unless a majority of IMF shareholders say they recognize the government, and that hasn't happened."

Yellen also said that the Treasury has discussed with Chinese authorities the need for more Chinese state lending entities to participate in G20 debt relief efforts for poor countries

She also told lawmakers that Treasury’s budget request includes roughly $1 billion to help developing countries adapt to climate change, including expanding clean energy and conserving rain forests, which absorb carbon emissions.

U.S. Treasury's Yellen says Congress needs to fund debt relief programs
 

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Comments (3)
Don Burris
Don Burris Jun 10, 2021 5:54PM ET
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All she knows is how to print fiat money.
JAMES CUNHA
JAMES CUNHA Jun 10, 2021 4:41PM ET
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Debt relief? How about first tightening up the money supply?
Max Gothe
Max Gothe Jun 10, 2021 2:57PM ET
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Why bail out Trumpers. They can't even understand anything longer than a 2 word bumper sticker slogan, let alone how to keep a job.
Kal MBA
Kal MBA Jun 10, 2021 2:57PM ET
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The funding is for developing countries, not domestic.
Felipe Daniel
Felipe Daniel Jun 10, 2021 2:57PM ET
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The funding is not domestic
igor bogdanoff
igor bogdanoff Jun 10, 2021 2:57PM ET
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"Im not polarized, you're polarized" - keep hating your fellow Americans, neighbours and family while politicians on both sides laugh at you.
Chuck Meaffer
Chuck Meaffer Jun 10, 2021 2:57PM ET
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Highest unemployment rates are amongst blue states. Lowest amongst red states.
 
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