Pandemic aid to poorest countries critical to U.S. interests: Treasury nominee Adeyemo

RIO DE JANEIRO, BRAZIL – Wally Adeyemo, President Joe Biden’s nominee for the No. 2 job at the U.S. Treasury, said it was critical to end the COVID-19 pandemic everywhere around the globe and doing so would require providing resources to some of the poorest countries.

Adeyemo made the comment at his confirmation hearing before the Senate Finance Committee when asked about a possible new allocation of the International Monetary Fund’s own currency, or Special Drawing Rights (SDRs), that would allow rich countries to provide additional resources to poorer countries.

“Providing financial resources to some of the poorest countries in the world is going to be critical to our national security if we seek to make sure that COVID-19 isn’t something that continues to affect us,” Adeyemo said.

Democratic Senator Elizabeth Warren told Adeyemo it was no surprise that the Trump administration had blocked issuance of new SDRs, a move akin to a central bank printing money, but she hoped the Biden administration would reverse that position.

“I hope Treasury will commit to delivering this crucial support,” she said. “This pandemic won’t be over for us until it’s over for everyone, and our economy won’t fully recover until other countries’ economies are back on their feet as well.”

The U.S. Conference of Catholic Bishops and an alliance of faith groups urged Biden in a letter on Tuesday to back a US$3 trillion issuance of the IMF’s currency to help poor countries devastated by the coronavirus pandemic.

Italy, which is leading the Group of 20 major economies this year, is pushing for a more moderate US$500 billion allocation, a move backed by France, Germany and other big countries.

Adeyemo gave no details of how the aid should be provided, and U.S. officials have not communicated a firm position on a new SDR allocation. Treasury declined to comment.

It was not clear if Treasury Secretary Janet Yellen would back an SDR allocation when she meets virtually with other G20 finance officials on Friday.

Yellen assured Italy’s top central banker on Tuesday that Washington would work closely with Italy during its G20 presidency on shared priorities such as ending the pandemic and improving support for low-income countries, Treasury said in a statement that did not address the SDR issue.

IMF Managing Director Kristalina Georgieva first proposed an SDR allocation early in the pandemic but faced resistance from the United States, the IMF’s biggest shareholder, which argued such a move would provide little aid to the countries that needed it most.

Republicans also worry that it could provide funds to countries like Iran and Venezuela that are under U.S. sanctions.

Civil society groups and religious leaders are urging Washington to drop its opposition, arguing that an SDR issuance would help provide urgently needed resources for smaller countries at virtually no cost.