US Treasury’s Yellen, IMF chief urge multilateral debt solutions

Yellen also says US ‘desperately’ needs Congress to act on stimulus measures after record economic contraction.

United States Treasury Secretary Janet Yellen and the head of the International Monetary Fund (IMF) have agreed on the need for multilateral solutions to address debt vulnerabilities and other issues facing the global economy, the Treasury Department said.

Yellen’s call with IMF Managing Director Kristalina Georgieva was the latest in a series of initial calls with top global finance officials after taking office last week.

“Secretary Yellen conveyed her intention to work closely with the IMF on the priorities of continuing to respond effectively to the COVID-19 pandemic, re-invigorating economic growth to support a strong global recovery, fighting inequality, and forcefully addressing the threat of climate change,” the Treasury said in a statement.

Georgieva, in a tweet, described the call as “warm & productive”.

“We agreed that fighting the pandemic, boosting growth, combating income inequality, and tackling climate change are top priorities, and that global engagement to support low-income countries is essential,” Georgieva wrote on Twitter. “2021 is a critical year of action!”

No further details were immediately available.

External experts and global economic officials say they see growing consensus about the need for a new allocation of IMF Special Drawing Rights (SDRs), a move akin to a central bank printing money, that was blocked by Yellen’s predecessor, Steven Mnuchin.

Georgieva had called for such a move early in the pandemic, but the Trump administration blocked it, arguing it would provide very little funding to the countries that needed it most since the drawing rights are distributed in line with each country’s shareholding.

The administration of US President Joe Biden has signalled support for a new allocation of SDRs and legislation to back such a move is working its way through the now Democratic-controlled Congress.

‘Desperately’ in need of aid

Separately, Yellen said that new growth forecasts from the Congressional Budget Office (CBO) showed the US “desperately” needs Congress to act on Biden’s coronavirus-proposed rescue package.

“Last year, the economy shrunk more than any other since the end of World War II. With the growth that the CBO projects, it will be years before the country reaches full employment again,” Yellen said in a statement, issued after speaking with Senate Democrats on Tuesday about Biden’s proposed $1.9 trillion American Rescue Plan.

The CBO on Monday updated its forecasts to show new, rosier gross domestic product growth projections for 2021, but a full recovery in jobs to pre-pandemic levels not taking place until 2024.

Yellen plans to hire David Lipton, an economist who served as Georgieva’s deputy until February 2020, as a senior adviser, six sources familiar with the matter told the Reuters news agency on Tuesday.

Lipton will focus on the US role within the Group of Seven advanced economies and the larger Group of 20 economies in a temporary role, several sources said on condition of anonymity.