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UPDATE 1-U.S. Treasury chief urges IMF, World Bank to be prudent fighting pandemic

Wed, 14th Oct 2020 23:50

(Adds comments on IMF resources, debt framework)

By Andrea Shalal and David Lawder

WASHINGTON, Oct 14 (Reuters) - 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."
(Reporting by Andrea Shalal and David Lawder; Editing by Leslie
Adler and David Gregorio)

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