U.S. Treasury Secretary Steven Mnuchin on Wednesday urged the International Monetary Fund and World Bank to work judiciously within their existing resources to fight the coronavirus pandemic and urged G20 countries to endorse a proposed debt restructuring framework.
In a statement to the two institutions’ steering committees, Mnuchin said they needed to continue to provide financing, advice and capacity development to aid countries hurt by the COVID-19 pandemic. But as they disburse billions of dollars in emergency funds, they need to plan for transitions to normal financing arrangements, he added.
“It is critical that the World Bank manage financial resources judiciously and transparently, with clear justifications for allocations to countries with robust access to other financing sources, so as not to burden shareholders with premature calls for new financing,” Mnuchin said.
Mnuchin’s statement, which comes as the IMF and World Bank hold annual meetings this week, made no mention of calls from other countries for the Fund to issue a new allocation of Special Drawing Rights. The Treasury opposed that move, which is akin to a central bank creating hundreds of billions of dollars in new currency reserves for IMF countries.
The World Bank, which raised $13 billion in new capital from members in 2018, should target its resources where needs are highest and no additional shareholding adjustments are needed, Mnuchin said.
The Treasury chief, who oversees the dominant U.S. shareholdings in both institutions, said the IMF should fully use its existing financing tools but it may need to be more flexible in conditions it imposes on borrowing countries, including for those that need to restructure external debts.
He urged IMF leaders to keep the board updated on the adequacy of the Fund’s $1 trillion in lending capacity and to execute an expansion of its crisis lending fund.
Mnuchin said that the IMF should encourage countries with particularly difficult circumstances to move from emergency financing to traditional IMF financing programs that require structural reforms to boost growth.
“Even as the IMF deploys its resources towards crisis response, it must also remain focused on delivering on its core mandate of global economic and financial stability. In this context, we look forward to the prompt resumption of bilateral surveillance to provide much-needed policy advice,” Mnuchin said
Mnuchin also said that a new debt framework that would help low-income countries restructure debts, should be quickly endorsed by G20 countries. He said the plan, agreed in principle by G20 finance leaders, would “provide debt relief on common parameters, with equitable burden sharing that covers all private and official bilateral creditors.”