Written by David Lowder
WASHINGTON (Reuters) – The U.S. Treasury Department’s top economic diplomat on Friday urged the International Monetary Fund and multilateral development banks to implement new measures to provide short-term liquidity support to low- and middle-income countries to avert a debt crisis. He called for action to be taken.
Jay Shambaugh, the Treasury’s undersecretary for international finance, said at an Atlantic Council event that the Treasury Department is “working to find a better path forward” for countries with high but sustainable debt facing liquidity pressures. He said he is cooperating with these agencies.
Mr. Shambaugh, who oversees America’s dominant shareholdings in the IMF and World Bank, will announce new plans to meet the needs of the vast number of countries with which the financial institutions do business at the IMF and World Bank’s annual meetings later this month. He said he hopes to make progress in developing mechanisms and changes in program design. A temporary shock.
Average annual spending on debt servicing in low-income countries jumped from about $20 billion to $60 billion between 2010 and 2020, with some countries facing large principal repayments in the coming months. Shambaugh said this could put the global debt structure under “significant strain”. .
“If you are a country committed to sustainable development and are prepared to work with the IMF and MDBs to enable large-scale financing alongside important reform measures, then you can We need a financing package from the private sector. We need liquidity in a way that supports sustainable long-term development,” Shambaugh said.
He said the plan “requires hard work and innovation” from international financial institutions to ensure financing and reforms in a way that avoids temporary fiscal adjustments leading to permanent damage through cuts in vital investment. He added that programs need to be designed. , infrastructure, etc.
Criticism of China
Mr. Shambaugh also criticized China’s economic policies, including the government’s recent actions to increase subsidies for investment in manufacturing, even though it produces a third of the world’s industrial goods. continued. He said the strategy could cause export spillovers to other countries and was "unlikely to succeed” without domestic demand.
“Despite China’s already significant role, its focus on non-market tools and subsidized manufacturing means that China is looking to low-cost manufacturing as its next step in development. It also means that the typical development path for many countries may be closed off,” Shambaugh said. . “And by directing those savings to specific sectors, we increase the likelihood of overcapacity and spillover to other countries.”
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Shambaugh said the IMF needs to pay more attention to the sources of China’s external surplus and the role of industrial policy. The comment echoed comments made last week by another senior Treasury official, Brent Neiman, who said the IMF had been “too polite” in assessing China’s economic policy.
Shambaugh said he was “encouraged” by the new stimulus package announced by the People’s Bank of China, but said the Chinese government needed to include more fiscal stimulus to shift spending to households.
(Reporting by David Lawder; Editing by Andrea Ricci)
