Hybrid Hearing - The Annual Testimony of the Secretary of the Treasury on the... (EventID=114626)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, April 6, 2022, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a hybrid hearing entitled, “The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System." ___________________________________ Witness for this one-panel hearing will be: • The Honorable Janet L. Yellen, Secretary of the Treasury ___________________________________ Background The International Financial Institutions Act (22 U.S.C. §262r-4) requires the Secretary of Treasury to present testimony annually before the House Financial Services Committee on the state of the international financial system and U.S. priorities with respect to U.S. participation in the international financial institutions. The Secretary of the Treasury will also discuss other issues related to U.S. global economic cooperation and major international developments affecting the U.S., including Treasury’s role in implementing and enforcing sanctions against Russia. The current global economic order established by the West with United States leadership after World War II is underpinned by Western values of respect for the rule of law and human rights, democratic governance with systems of checks and balances, markets as the engines of growth, and a robust public sector to address market failures, provide social safety nets, and ensure that the benefits of growth are broadly shared. The international framework for the post-war global economic system also established the International Monetary Fund and the World Bank as central pillars of global economic cooperation. U.S. Participation in the International Financial Institutions The Department of the Treasury is the lead agency responsible for U.S. engagement with the international financial institutions (IFIs), including the International Monetary Fund (IMF), the World Bank, and the regional development banks. Collectively, these institutions are the largest providers of climate finance globally, and they continue to play a leading role in the global response to the COVID-19 pandemic. Special Drawing Rights Created by the IMF in 1969 to supplement the official reserves of its members, countries can hold Special Drawing Rights (SDRs), a special reserve asset of the IMF distributed to each member country in proportion to its shareholding in the Fund, as part of their precautionary reserve balances or convert SDRs for hard currency to finance balance of payments needs, adjust the composition of their reserves, or pay back IMF loans. In August 2021, the IMF approved a $650 billion allocation of SDRs, of which $275 billion went to emerging market and developing countries, including $21 billion to low-income countries, to help transform the global pandemic crisis into a fair and resilient economic recovery. A primary concern of those opposed to such an allocation was that it would also provide unconditional liquidity to countries who act against U.S. interests, such as China, Russian, Iran, Syria, Venezuela, and Belarus. Eight months after the SDR issuance, these geopolitical objections have so far proved to be unfounded. The Department of Treasury has noted that while Russia and Belarus did receive their legal share of the recent SDR allocation, they will not be able to use them. In fact, to date, Belarus has not used any of its new SDR holdings, and Russia continues to hold virtually all of its recently acquired SDRs as well. Given the recent G7 sanctions against transactions with Russia’s central bank, and the raft of new sanctions against Belarus, it would be difficult for any country to convert the SDRs of either country without running afoul of international sanctions. Resilience and Sustainability Trust In July 2021, the IMF Board of Directors found that “climate change is a global existential threat that poses critical macroeconomic and financial policy challenges for the whole Fund membership in the coming years and decades.”5 The U.S. has led efforts within the G-7 and G-20 group of nations to support a $100 billion Resilience and Sustainability Trust (RST) at the IMF to advance global public policy goals, such as pandemic or climate resilience financing, in low-income and middle-income countries.6 The RST is expected to be available to low-income countries, vulnerable and developing small states, and some middle-income countries. The RST will be funded by SDRs channeled from advanced and several large emerging market countries. Further specifics on the RST, including conditionality terms, access to financing, and expected collaboration with... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409256