US Treasury’s Janet Yellen says Congress needs to fund debt relief programmes for poor countries

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

Yellen, in prepared remarks to a US 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 US 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 US 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 US$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 US adversaries, including China, Russia and Iran.