The International Monetary Fund, like governments around the world, has to learn to do more with less and needs to be more effective, U.S. Treasury Secretary Steven Mnuchin said on Wednesday.
Key among the needed reforms is a focus on conditions for financial aid, and evaluation of countries’ ability to manage debt, Mnuchin said in his statement to the IMF’s steering committee. The calls for “debt transparency” have been increasing in volume in the run up to this week’s spring meetings of the IMF and World Bank, amid concern that a surge in lending by China to developing nations could sow the seeds of financial strife.
“Debt owed to emerging creditors is at a critical juncture, with debt levels rising among both low income/emerging and advanced economies,” Mnuchin said in the prepared statement. “Increasingly, opaque or unsustainable lending practices weaken investor confidence, erode governance and accountability and create a drag on economic growth.”
The IMF has cited high debt levels as a key risk to the global economy, which is slowing down.
Mnuchin said the fund must “continue to evolve to respond to the challenges ahead” and improve its effectiveness. He stressed the need for strengthened surveillance of member countries, including tighter conditions for lending, “to assure its members that it is delivering effectively on its core mission.”
He cited the case of Argentina—which has an IMF aid program worth about $56 billion—and said the requirements “addressing weaknesses in monetary and fiscal policies helped to stabilize financial markets, putting the economy on track to return to growth.” Lending should “address parsimony and criticality of conditions,” he said.
And Mnuchin said the IMF currently has enough resources to fulfill its mission, so does not need increased contributions from members. But he supported the renewal of a program to borrow from members in the event of a crisis.
“Of most immediate concern is ensuring the IMF has sufficient financial resources to respond to potential crises,” Mnuchin said. “In our view, the IMF currently has ample resources to achieve its mission, and countries also have considerable complementary resources should a crisis emerge.”
However, some borrowing arrangements are set to expire in the next few years, Mnuchin added. “We look forward to working closely with the IMF and other members to identify options for extending a portion of these borrowed resources so that the IMF can maintain adequate resources to deliver on its mission,” he added.