Tlaib Urges Sec. Yellen To Apply ‘Special Drawing Rights’ To Developing Countries With Heavy Debts

3 months ago

Earlier this month, Rep. Rashida Tlaib (D-MI) questioned Treasury Secretary Janet Yellen on developing countries debt payment plans during a House Financial Services Committee hearing.

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Transcript

00:00And she's recognized for five minutes.

00:02Thank you, Mr. Chair.

00:03Thank you, Secretary, for being here.

00:06As you probably know, many of the countries

00:09in the global south are facing a tremendous debt burden.

00:15I think that's almost half of the world's population

00:17right now.

00:183.3 billion people are impacted by this,

00:21living in countries that spend more

00:23on the interest on their debts than the health care

00:26or education in their communities.

00:29And you know an IMF issues fees called surcharges

00:33on heavily indebted countries.

00:35Secretary Linton, do you believe that developing countries

00:37suffering through perfect storm of global crises,

00:41including shocks to the food and fuel prices,

00:45soaring interest rates, climate change, and so much more,

00:49should be required to pay these fees on top of the interest

00:52they pay on their debt?

00:54Well, the surcharges framework, we

00:57think, is important to create appropriate incentives

01:02to repay the IMF in a timely way and to contain borrowings.

01:07But the IMF, with our support, is currently

01:12reviewing this policy.

01:13That's right.

01:13Do you support that review?

01:15Do you support that review?

01:16Yes, we are supportive of the review.

01:21Can you explain to our residents what the special drawing

01:24rights are at the IMF?

01:27Special drawing rights are essentially

01:32a system in which countries agree to provide lines.

01:41The way I think of it is providing countries

01:44with additional lines of credit that

01:47are in proportion to their quotas at the IMF.

01:53I love telling my residents that it actually

01:55would provide immediate relief to countries

01:57across the globe while costing the US payer nothing,

02:01absolutely nothing.

02:02Is that correct?

02:02Does it cost our US taxpayer any money?

02:05No, we earn interest on special, if we provide hard currency

02:13for special drawing rights, we earn interest on that.

02:18And it doesn't cost us anything.

02:20And Secretary Yellen, I've heard,

02:23is the United States actually standing

02:24in the way of new issuance or looking

02:28at the special drawing rights?

02:30Well, we thought at the onset and after the pandemic struck,

02:37which hit so many countries, created a global shortage

02:41of liquidity, that an SDR allocation was appropriate.

02:46And one took place, a large SDR allocation.

02:52At this point, we don't think an SDR allocation

02:56is needed or appropriate.

02:57So you don't think a new issuance is required?

02:59I mean, I don't want to send a message that our country,

03:02Secretary, doesn't, that our message to developing countries

03:05that the US is unwilling to respond to the debt crisis.

03:08We've been very supportive of an expansion of the Poverty

03:12Reduction and Growth Trust.

03:15But why not just help them?

03:17I don't understand.

03:18Well, it does help them because it gives them

03:21interest-free loans to the countries that

03:25are most in need.

03:26So more debt.

03:27So the way the international financial institutions

03:29are governed is inconsistent.

03:30Well, it's debt.

03:31SDRs, in a way, are debt, too.

03:33Because countries that use them do

03:35have to pay interest on them.

03:38So it's not that different.

03:39Yeah, the way the international financial institutions

03:42are governed is inconsistent with the democratic ideals

03:45we seek at home.

03:46And in the IMF, for example, the US and other G7 countries

03:51get 41% of votes, despite only having

03:5310% of the global population.

03:55So Secretary Yellen, what would you

03:57say to countries who feel we don't practice what we preach

04:01when we come to democratic decision-making

04:03at the international financial institution?

04:06So we have certainly been supportive of governance

04:09reforms that increase the role and the voice of borrowing

04:16countries so that they have more say in representation.

04:24We've supported adding directors who

04:30represent low-income countries.

04:34And we've supported the idea of reviewing

04:38the formula that would determine quota allocations in the future.

04:45We've been opposed to ad hoc quota review that

04:53would reallocate in a sort of ad hoc way voting rights.

05:00But we are supportive of the IMF reviewing the formula that

05:07determines voting rights.

05:09Thank you, Secretary.

05:10IU.

Tlaib Urges Sec. Yellen To Apply ‘Special Drawing Rights’ To Developing Countries With Heavy Debts

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