[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]




 
                     THE ROLE OF THE INTERNATIONAL

                      MONETARY FUND IN A CHANGING

                            GLOBAL LANDSCAPE

=======================================================================

                            VIRTUAL HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,

                       INTERNATIONAL DEVELOPMENT

                          AND MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 17, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-70
                           
                           
                           
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]        
  
  
                           
                           
                          ______                       


           
           U.S. GOVERNMENT PUBLISHING OFFICE 
47-129PDF              WASHINGTON : 2022               



                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
           Subcommittee on National Security, International 
                    Development and Monetary Policy

                  JIM A. HIMES, Connecticut, Chairman

JOSH GOTTHEIMER, New Jersey, Vice    ANDY BARR, Kentucky, Ranking 
    Chair                                Member
MICHAEL SAN NICOLAS, Guam            FRENCH HILL, Arkansas
RITCHIE TORRES, New York             ROGER WILLIAMS, Texas
STEPHEN F. LYNCH, Massachusetts      LEE M. ZELDIN, New York
MADELEINE DEAN, Pennsylvania         WARREN DAVIDSON, Ohio
ALEXANDRIA OCASIO-CORTEZ, New York   ANTHONY GONZALEZ, Ohio
JESUS ``CHUY'' GARCIA, Illinois      PETE SESSIONS, Texas
JAKE AUCHINCLOSS, Massachusetts

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 17, 2022............................................     1
Appendix:
    February 17, 2022............................................    43

                               WITNESSES
                               
                      Thursday, February 17, 2022

Ghosh, Jayati, Professor of Economics, University of 
  Massachusetts at Amherst.......................................     8
Rogoff, Kenneth, Thomas D. Cabot Professor of Public Policy, 
  Harvard University.............................................    11
Segal, Stephanie, Senior Associate, Economics Program, Center for 
  Strategic and International Studies............................     6
Sembene, Daouda, Distinguished Nonresident Fellow, Center for 
  Global Development.............................................     5
Stiglitz, Joseph E., University Professor, Columbia University...    10

                                APPENDIX

Prepared statements:
    Ghosh, Jayati................................................    44
    Rogoff, Kenneth..............................................    53
    Segal, Stephanie.............................................    55
    Sembene, Daouda..............................................    61
    Stiglitz, Joseph E...........................................    69

              Additional Material Submitted for the Record

Sembene, Daouda:
    Written responses to questions for the record from 
      Representative Himes.......................................    73
Stiglitz, Joseph E.:
    Written responses to questions for the record from 
      Representative Himes.......................................    76
    Written responses to questions for the record from Chairwoman 
      Waters.....................................................    79


                     THE ROLE OF THE INTERNATIONAL

                      MONETARY FUND IN A CHANGING

                            GLOBAL LANDSCAPE

                              ----------                              


                      Thursday, February 17, 2022

             U.S. House of Representatives,
                 Subcommittee on National Security,
                          International Development
                               and Monetary Policy,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 12:05 p.m., 
via Webex, Hon. Jim A. Himes [chairman of the subcommittee] 
presiding.
    Members present: Representatives Himes, Gottheimer, San 
Nicolas, Lynch, Garcia of Illinois; Barr, Hill, Williams of 
Texas, Zeldin, Davidson, and Sessions.
    Ex officio present: Representative Waters.
    Also present: Representative Pressley.
    Chairman Himes. The Subcommittee on National Security, 
International Development and Monetary Policy will come to 
order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of the subcommittee are authorized to 
participate in today's hearing.
    Today's hearing is entitled, ``The Role of the 
International Monetary Fund in a Changing Global Landscape.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    The International Monetary Fund (IMF or the Fund) plays an 
essential role in the modern global monetary system. When a 
financial crisis hits, the IMF is essential to ensuring the 
system does not collapse, by stepping in to calm markets and to 
prevent chaos. This work, however, has never been without 
controversy.
    The IMF does and should play a critical role both as a 
policy advisor and as a lender of last resort. Some, however, 
rightly in my mind, criticize the IMF for demanding that 
countries apply what may be overly-tough policy reforms in 
times of intense stress, requiring governments to cut social 
spending and wages.
    Debates about the proper role of the IMF resurfaced when 
the COVID-19 pandemic triggered a sweeping global recession. 
The IMF's COVID response suggests that it has shifted 
strategies somewhat away from the traditional policies of 
austerity. Instead, this time around, the Fund encouraged 
governments to spend liberally, in order to bolster struggling 
economies to address the pandemic and to not withdraw support 
too early.
    But, now, nearly 2 years removed from the start of the 
pandemic, the IMF has urged countries to prepare for a return 
to normalcy. As governments beat back the virus and distribute 
more vaccines, the IMF will be monitoring infection rates to 
ensure that recovery strategies are fair, inclusive, and 
sustainable. And with the pandemic pushing nearly 100 million 
people worldwide into poverty, the IMF will use its research 
skills and technical assistance to help build and rebuild 
equitable societies.
    Now, other challenges exist. Dozens of countries are 
nearing unsustainable levels of sovereign debt, requiring IMF 
involvement to coordinate with creditors, assess risk, and work 
with international partners to restructure payment plans in a 
way that is consistent with the well-being of their people.
    Likewise, climate change and its associated costs and risks 
will require the IMF to help identify macroeconomic risks 
related to that, to offer technical assistance, and to leverage 
its financing tools to assist countries in tackling these 
systemic and structural issues.
    The United States is the IMF's largest financial 
contributor, and we have a deep interest in ensuring that the 
Fund is prepared to confront these challenges head-on. A well-
prepared IMF can work closely with policymakers to enact 
reforms that stimulate inclusive growth, adapt to macroeconomic 
threats, and overcome unexpected obstacles.
    And, of course, Congress, and this subcommittee in 
particular, plays a vital oversight role in tracking the IMF's 
progress, and boosting resources when they are needed.
    One issue which I hope we will deal with a bit today is the 
issue of the special drawing rights (SDRs).
    Last August, when the Fund deployed $650 billion of special 
drawing rights, or SDRs, several of my colleagues argued that 
the SDRs could provide unconditional liquidity to countries who 
act against broadly-shared international values, such as 
China's activity with respect to its Uighurs, the activities by 
the despot in Syria, and, of course, Russia now sits poised to 
invade a vulnerable sovereign country.
    Since last August's SDR allocation, however, none of those 
countries have converted their SDRs into hard currency, and the 
IMF has blocked SDR access to countries with unrecognized 
governments, like Afghanistan, Venezuela, and Burma.
    Nevertheless, we should continue discussing these arguments 
on their merits. After a worldwide pandemic, a global financial 
crisis, and many other fiscal emergencies, the Fund is no 
stranger to tough decisions. Now with the world's economy 
facing new and evolving challenges, the IMF must be ready to 
adapt as well.
    With that, I would like to welcome our panel of witnesses 
and thank them for helping us continue this important 
discussion.
    I now recognize the ranking member of the subcommittee, the 
gentleman from Kentucky, Mr. Barr, for 5 minutes for an opening 
statement.
    Mr. Barr. Thank you, Mr. Chairman, for holding today's 
hearing.
    And thank you to our witnesses for joining us today.
    The International Monetary Fund serves an important role of 
promoting international macroeconomic stability. I recently had 
the pleasure of visiting Bretton Woods, New Hampshire, the site 
of the 1944 meeting where representatives from 45 nations 
gathered to discuss post-war economic recovery, which 
ultimately resulted in the creation of the IMF.
    Over the decades, the IMF has grown, adapted, and changed. 
Our hearing today will examine the appropriate role of the IMF 
and how it has functioned through crises, including the global 
financial crisis, the eurozone crisis, and, most recently, the 
economic crisis brought on by the COVID-19 pandemic.
    We will also examine how the IMF has evolved, including how 
recent developments in the Fund's objectives may stray from its 
core mission as a lender of last resort and a catalyst for 
reform in struggling economies.
    As the COVID-19 pandemic raged across the world, many 
developing nations struggled, and turned to the IMF for 
assistance. The IMF abandoned the traditional and longstanding 
requirements--as the chairman noted--associated with its loans, 
offering no-strings-attached assistance.
    As the COVID crisis subsides, we must face reality: The IMF 
is a lending agency and must be repaid.
    Unfortunately, what began as an attempt to help struggling 
nations navigate the challenges from the pandemic has further 
fueled the IMF's mission creep away from its traditional role 
as lender of last resort into a politicized development 
organization.
    As we have seen with other lenders of last resort, such as 
the Federal Reserve, activist organizations and/or vocal 
policymakers are intent on using the COVID-19 pandemic as a 
smokescreen to corrupt the IMF into a no-strings-attached 
checkbook or to focus it on matters outside of its narrow 
mandate.
    Last summer, the IMF approved a $650 billion disbursement 
of its special drawing rights so that developing economies 
could obtain hard currency and import medical supplies and 
personal protective equipment to combat the pandemic. While 
potentially well-intentioned, this allocation was troubling 
because it strayed from the core purpose of SDRs, and awarded 
handouts to U.S. adversaries. SDRs are intended to address a 
long-term need in world reserves, not to hand governments 
unconditional aid to boost emergency spending.
    Based on the SDR allocation formula, only 3 percent of SDRs 
end up going to the poorest nations. Meanwhile, other 
countries, such as Mexico and Argentina, admitted their money 
may not be spent to tackle COVID-19 as intended but, rather, be 
used to pay off old loans or to prop up struggling state-owned 
enterprises. Even more unsettling is the fact that these SDRs 
will go to countries like Syria, Iran, China, and Belarus, 
whose brutal dictators are certainly not using them to purchase 
PPE for their citizens.
    Despite the misgivings by some Biden Administration 
Treasury Department officials about the $650-billion SDR 
allocation, some of my colleagues on the other side of the 
aisle have called on the IMF to triple-down, with an additional 
$2.1-trillion no-strings-attached handout to countries like 
Russia and China.
    A portion of those SDRs is also being funneled into a new 
Resilience and Sustainability Trust at the IMF intended for 
climate change and public health loans, showing a complete lack 
of understanding or perhaps a blatant disregard for the true 
purpose of the IMF.
    This attempt to redefine the core mission of the IMF comes 
at a time when its leadership is mired in scandal. Last year, a 
bombshell investigation revealed how Kristalina Georgieva, 
former CEO of the World Bank, pressured her staff to manipulate 
data after Chinese officials complained that their economy 
hadn't ranked highly enough in the Bank's widely-read and 
regarded, ``Doing Business'' report. An independent report by 
law firm WilmerHale detailed the episode. And Ms. Georgieva now 
leads the IMF.
    Members of this committee from both parties expressed 
concern about the leadership at the IMF following these 
revelations. Republicans and Democrats can agree that strong, 
credible leadership at the IMF is necessary to ensure that the 
Fund is able to sustainably navigate the future and to operate 
squarely within its mandate.
    While we are at the crossroads in global competitiveness, 
as China seeks to usurp the U.S. as the preeminent economic 
power, China's debt-trap diplomacy has left many developing 
economies at the mercy of the Chinese Communist Party (CCP). 
There is little debt transparency about loans from China. I am 
concerned that no-strings-attached funds from the IMF will be 
used to satisfy the usurious terms of Chinese loans to 
struggling economies, including through the Belt and Road 
Initiative. Congress should demand reform and accountability to 
ensure that this is not the case.
    I fear, Mr. Chairman, that the IMF has lost its way. I hope 
the hearing today will inform us on how best to return the IMF 
to its core mission and ensure that it remains a tool for 
macroeconomic stability well into the future.
    Thank you, Mr. Chairman, and I yield back.
    Chairman Himes. I thank the ranking member.
    And I now have the privilege of recognizing the Chair of 
the full Financial Services Committee, the gentlewoman from 
California, Chairwoman Waters, for 1 minute.
    Chairwoman Waters. Thank you, Chairman Himes.
    The International Monetary Fund has long been criticized 
for its willingness to impose painful reforms on countries in 
crisis with little concern for how the burden of these painful 
economic adjustments were distributed in society. In many 
cases, the effect was to undermine democracy itself, as the 
people who were made to bear the short-term pain began to 
associate the IMF's imposed austerity with their democratic 
government.
    While there has been some improvement recently, I look 
forward to hearing from our witnesses today not only on the 
issue of conditionality, but also on the increasing levels of 
debt distress many countries now face, and how we should best 
address these challenges.
    I yield back, and thank you very much.
    Chairman Himes. I thank the chairwoman.
    And now, we welcome the testimony of our distinguished 
witnesses: Dr. Daouda Sembene, a distinguished nonresident 
fellow with the Center for Global Development; Ms. Stephanie 
Segal, a senior associate with the Economics Program at the 
Center for Strategic and International Studies; Professor 
Jayati Ghosh, a professor of economics with the University of 
Massachusetts at Amherst; Dr. Joseph Stiglitz, a university 
professor at Columbia University; and Professor Kenneth Rogoff, 
the Thomas D. Cabot Professor of Public Policy at Harvard 
University.
    Witnesses are reminded that your oral testimony will be 
limited to 5 minutes. You should be able to see a timer on the 
screen in front of you that will indicate how much time you 
have left. I would ask that you be mindful of the timer, and 
quickly wrap up your testimony once your 5 minutes have 
expired, so that we can be respectful of both the witnesses' 
and the subcommittee members' time.
    And without objection, your written statements will be made 
a part of the record.
    Dr. Sembene, you are now recognized for 5 minutes for an 
oral presentation of your testimony.

STATEMENT OF DAOUDA SEMBENE, DISTINGUISHED NON-RESIDENT FELLOW, 
                 CENTER FOR GLOBAL DEVELOPMENT

    Mr. Sembene. Thank you. Thank you very much, Chairman 
Himes. I am grateful to you, Mr. Chairman, Ranking Member Barr, 
Chairwoman Waters, and the distinguished members of the House 
Financial Services Subcommittee on National Security, 
International Development and Monetary Policy, for inviting me 
to speak today at this hearing on the role of the International 
Monetary Fund in this changing global landscape.
    My name is Daouda Sembene, and I am a distinguished 
nonresident fellow at the Center for Global Development.
    Until 2018, I was an executive director of the 
International Monetary Fund, where I represented 23 African 
countries on the executive board. During my tenure, I chaired 
the Statutory Board Committee, which is responsible for 
strengthening collaboration between the IMF and other 
international institutions, notably the World Bank, the United 
Nations, and the World Trade Organization (WTO).
    After my IMF support tenure, I served in my home country of 
Senegal as senior economic advisor to President Macky Sall. I 
now run a global development advisory focused on Africa, called 
AFRICATALYST.
    In the written testimony I submitted for your consideration 
yesterday, I made a number of detailed suggestions about the 
future role of the IMF. Now, I would like to take this 
opportunity to emphasize some key messages I wanted to convey 
in my testimony.
    My first message is that the IMF should continue to play a 
central role in efforts by the international community to 
address global challenges such as climate change and pandemics, 
including by advising countries on appropriate macroeconomic 
policy responses. This would be in line with its mandate, 
especially in view of the enormous potential of this calamity 
to shake global financial stability and derail global recovery.
    At the same time, I believe that the IMF should place a 
special focus on the world's most-vulnerable countries, where 
it can make the most difference. In addition to policy advice, 
the institution should be well-equipped to deploy on a timely 
and needed basis adequate levels of financial and technical 
assistance.
    At this time, an urgent role for the IMF to play is to 
sustain its support for countries around the world that still 
face daunting challenges exacerbated by the COVID-19 crisis, 
including rising poverty, significant financing gaps, growing 
debt vulnerabilities, and weak social protections.
    My second message is that, to be more effective, the IMF 
needs to adapt its business model and policies to the evolving 
global landscape, while better leveraging partnerships with 
other multilateral institutions. For instance, it is critical 
to ensure that the access of developing countries and fragile 
states to IMF's resources during this time, crisis time, but 
also in the post-pandemic era, is more determined by the scope 
of their financing needs rather than the size of their quota.
    The IMF also needs to make progress toward full country 
ownership of macroeconomic adjustment in countries that request 
its financial assistance.
    Let me now conclude with my final message. Successful IMF 
engagement with member countries hinges on timely support from 
its major shareholders, particularly the United States. But it 
also requires holding IMF leadership accountable for 
institutional performance.
    Under existing decision-making processes prevailing at the 
IMF, no major initiative can be approved by the executive board 
without the U.S.'s consent. And then, without U.S. leadership 
and support, the IMF's ability to fulfill its mandate and 
provide timely and adequate support for the countries in most 
need will therefore be very limited.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Sembene can be found on page 
61 of the appendix.]
    Chairman Himes. Thank you, Dr. Sembene.
    Ms. Segal, you are now recognized for 5 minutes.

 STEPHANIE SEGAL, SENIOR ASSOCIATE, ECONOMICS PROGRAM, CENTER 
            FOR STRATEGIC AND INTERNATIONAL STUDIES

    Ms. Segal. Thank you. Thank you, Chairman Himes, Ranking 
Member Barr, Chairwoman Waters, and distinguished members of 
the subcommittee. Thank you all for the opportunity to testify 
before you today.
    The IMF's Articles of Agreement lists six purposes that 
guide the institution in all of its policies and decisions, 
including the promotion of international monetary cooperation 
and temporary financing to help countries correct macroeconomic 
imbalances.
    In practice, the IMF focuses on three principal activities. 
It monitors economic and financial developments through IMF 
surveillance. It provides financial support to facilitate 
adjustment and shorten crises through IMF lending. And it 
builds capacity with training and technical assistance through 
capacity development.
    Over the years, these activities have evolved along with 
the international system. That evolution is often prompted by 
crisis and the recognition that existing tools may not be 
adequate to deal with current challenges.
    Given the backdrop of the past 2 years, unprecedented in so 
many ways, it is not surprising that we are again seeing 
further evolution. On the one hand, we have a greater 
appreciation of the risks to growth and stability posed by 
threats such as climate change and pandemics. And on the other 
hand, there is concern that an overly-expansive list of items 
deemed, ``macrocritical,'' will dilute the IMF's effectiveness 
and steer the institution away from its founding purpose. The 
IMF and its members need to strike a balance between these 
competing considerations.
    I will focus my remaining time on two challenges facing the 
global economy: climate change; and debt.
    First, on climate change, one of the world's largest 
insurers recently called climate change the, ``biggest long-
term threat to the global economy.'' A report from the 
Financial Stability Board highlights that, ``physical risks as 
well as a disorderly transition to a low-carbon economy could 
have destabilizing effects on the financial system ... in the 
relatively short term.''
    Given these realities, failure to engage on climate would 
be at odds with the IMF's mandate. The question is how, and 
whether the IMF's tools are up to the task?
    IMF surveillance is the most immediate and consequential 
way in which the institution can engage its members on climate. 
The IMF's board supports coverage of climate-relatedissues in 
Article IV country reports whenever macrocritical. The board 
also supports including climate in the financial-sector 
assessment programs where climate change may pose financial 
stability risks.
    IMF surveillance entails a bilateral component which 
applies to all 190 members, and a multilateral component which 
covers regional and global conditions. This structure enables 
the Fund to engage on climate at the country level, where 
policy is typically set, and multilaterally, reflecting 
climate-change mitigation as a global public good.
    Unlike surveillance, IMF lending programs are active in 
only a subset of IMF members. Many of the largest carbon 
emitters have not had an IMF program in decades, if ever, 
meaning the IMF's ability to gain traction on climate issues 
through lending activities is more limited.
    That said, there can be a role for climate-related issues 
in IMF lending. Climate issues can impact budgets and the 
health of financial systems, areas covered in standard IMF 
programs.
    Also, the proposed Resilience and Sustainability Trust, or 
RST, provides another template for such engagement. If 
approved, and pending donor financing, the RST would be 
available to vulnerable members to target macrocritical 
structural challenges such as climate change and pandemic 
preparedness.
    Financial support for the RST could come from rechanneling 
SDRs to the most-vulnerable members. This would also address 
one of the common critiques of the recent allocation as not 
sufficiently benefiting the poorest countries.
    Turning to debt, the subcommittee rightly calls out rising 
levels of unsustainable sovereign debt as a challenge facing 
the IMF. The IMF alone cannot resolve debt vulnerabilities. 
Such resolution requires agreement between the debtor country 
and its public and private creditors to reschedule or 
restructure the debt. But the IMF plays an essential role in 
developing the macroeconomic framework and financing envelope 
that serves as the basis for such an agreement. The IMF, with 
G20 support, can drive this process and call for more 
predictable and time-bound targets for negotiations.
    Further, the IMF should bolster its concessional 
instruments. Additional donor support for the Poverty Reduction 
and Growth Trust (PRGT), along with the RST, is needed. The 
Fiscal Year 2022 budget request includes funding to cover 
grants to the PRGT and subsidy cost of rechanneling SDRs and 
would demonstrate U.S. leadership in supporting the IMF's most-
vulnerable members.
    In conclusion, I just want to thank the subcommittee for 
the chance to share my views, and I look forward to your 
questions.
    [The prepared statement of Ms. Segal can be found on page 
55 of the appendix.]
    Chairman Himes. Thank you, Ms. Segal.
    Professor Ghosh, you are now recognized for 5 minutes.

      JAYATI GHOSH, PROFESSOR OF ECONOMICS, UNIVERSITY OF 
                    MASSACHUSETTS AT AMHERST

    Ms. Ghosh. Thank you very much for this opportunity. I feel 
deeply grateful to be allowed to address this subcommittee.
    And I want to emphasize the crucial role that has already 
been talked about of the IMF, not just in maintaining financial 
stability, but in reviving the global economy.
    This is particularly important because there has been such 
inequality in fiscal stance over the course of the pandemic, 
with the advanced countries spending on average more than 16 
percent of gross domestic product (GDP) in additional COVID-19-
related spending, emerging markets spending only 5 percent, and 
low-income countries spending around 2 percent of their GDP. 
And this has obviously hindered their possibilities of 
recovery.
    In this context, the release of new SDRs has been 
absolutely crucial, even though they are unequally-distributed, 
because SDRs are automatic. They are debt-free. And we have 
heard already about the problems of sovereign debt in much of 
the developing world. They do not require fiscal 
conditionalities, which can be countercyclical, like so much 
other IMF lending. And it is effectively costless, which is a 
huge thing. There is no cost for other countries that do not 
use the SDRs.
    What is important to remember is that these are effective 
even when they are not used. Because the additional SDRs add to 
reserves, they reduce the borrowing costs of the recipient 
country, and they provide some kind of a cushion for the very 
volatile capital movements that we have seen and we are likely 
to see more of as U.S. and other interest rates are raised.
    But we also see that at least 80 countries have already 
used these SDRs in various ways: to add to their imports; to 
pay back the IMF, which is a very useful thing, going forward; 
and for their own budget increases.
    What is worth noting is that this has added, to some 
degree, to helping the world economy revive, but it has also 
helped the United States economy. There has been a very big 
increase in exports, monthly exports of the U.S. after August 
2021 when the SDRs were allocated.
    And I have provided in my written testimony some data on 
this. If you look at specific countries, like Ukraine, which is 
very important nowadays, Philippines, Congo, you find that 
there is a very significant increase after they have used the 
SDR allocation for additional imports.
    It is also worth noting that, in fact, the countries that 
many members of this committee are concerned about cannot 
access these SDRs. And it is not just that they have not. 
Russia, Iran, Syria, et cetera, cannot access it because the 
international banking system does not enable them to get ahold 
of it. Even though formally, they have gotten these SDR 
reserves, they will not be able to use them.
    And other governments which are not recognized by the IMF--
Afghanistan, Myanmar, Sudan, Venezuela--cannot access the SDRs, 
even though it is in the countries' reserve formally, but the 
governments cannot access it. China does not needs SDRs. China 
already has $3.5 trillion of reserves, and it really is 
unlikely to make any difference to China whether it gets SDRs 
or not.
    In addition, it is very important to enable the 
rechanneling of SDRs, as Ms. Segal has already pointed out, and 
I do believe that there are many important and imaginative ways 
in which the United States Government can use its own SDR 
allocation in this way.
    I believe that the RST, the sustainability trust set up by 
the IMF, is not the ideal mechanism. It is too small; it is 
only $50 billion. It involves debt, which is an additional 
problem, with associated conditions. It is only meant for low-
income countries or the countries that are IMF program 
countries, which really means that it is so limited that it is 
unlikely to have much impact.
    Instead, we should actually think of other ways of using 
the SDRs, including the U.S. allocation, the additional 
allocation, which it will never otherwise use. It could be used 
to improve the capital base of regional development banks, 
which could actually then lend out more to meet sustainable 
development goals, to provide climate finance, and so on.
    It can be provided in a trust that auctions the resources 
not on the basis of the ability to repay, but as grants for the 
best climate investments for both mitigation and adaptation, 
which is absolutely crucial. This is important, because we find 
that IMF programming still contains some austerity. Even though 
the most-recent loans did not involve it, most of the 
programming contains measures to reduce government spending.
    We know that this kind of inequality has sociopolitical 
consequences, and it has global consequences. And, therefore, 
it is important for the United States, which has such an 
ability to influence IMF positions and still holds such large 
SDR reserves, to assist in a global institution meeting global 
challenges.
    It is important not to be stuck in a mandate that was 
created 70 years ago, to allow a multinational, international 
financial institution to meet the global challenges that we 
face today, because otherwise we are unlikely to face them.
    Thank you.
    [The prepared statement of Dr. Ghosh can be found on page 
44 of the appendix.]
    Chairman Himes. Thank you, Professor Ghosh.
    Dr. Stiglitz, you are now recognized for 5 minutes.

 JOSEPH E. STIGLITZ, UNIVERSITY PROFESSOR, COLUMBIA UNIVERSITY

    Mr. Stiglitz. It is a pleasure to be here to address you on 
a set of issues that are so critical.
    We all know the importance of global financial stability. 
We cannot have a robust American economy in a world of 
financial instability. Enhancing stability can best be 
addressed multilaterally through the IMF.
    This is especially important as the world faces a 
multiplicity of risks. The pandemic, its economic aftermath, 
the climate crisis, the inequality crisis--all of these touch 
directly on the core mission of the IMF. It would be a 
dereliction of its responsibility if the IMF paid insufficient 
attention to any of these.
    Let me emphasize, this is not an issue of mission creep. 
The SDRs have long been a part of the IMF's toolkit and part of 
its architecture. Again, this is not a departure from its core 
mandate.
    The consequences of the pandemic should be obvious. Debts 
in most countries have increased significantly, and there is a 
growing concern that rising interest rates, combined with high 
levels of debt, could precipitate debt as well as balance-of-
payments crises. Such a crisis could be much harder to manage 
than earlier crises.
    Over the intermediate term, the consequences of the climate 
crisis could be even greater; 2008 showed what could happen to 
global financial markets as a result of the mispricing of the 
U.S. mortgage market. There is a significant risk of a 
mispricing of a much greater part of the global asset base, 
both fossil fuels and real estate. The COVID risk would be hard 
to contain.
    What the IMF can and should do for international financial 
stability is vital. In the remaining time, I would like to call 
attention to a few areas of concern.
    First, the $650-billion issuance of special drawing rights 
was of extraordinary importance. Several of the advanced 
countries have agreed to recycle these funds to those that need 
them.
    There is also a need for more issuances of special drawing 
rights. SDRs can be an important tool for sustaining global 
aggregate demand during periods when global demand is 
insufficient. And the international community has made a 
commitment to help developing countries make the green 
transition. An annual emission of SDRs would be a reliable way 
to achieve our climate commitments.
    The issuance of SDRs does not cost the U.S. Government 
anything, either in present or future costs.
    Second, many countries will need to restructure their debt, 
as we have already said. If we are to avoid the too-little-too-
late syndrome that has proven so costly, all creditors need to 
cooperate. Programs need to be designed to incentivize this.
    The debt sustainability analyses, which are the cornerstone 
of debt restructurings, have to be improved. For instance, 
there are analyses that don't recognize that making excessive 
demands on a country reduces growth.
    Third, for many countries facing debt crises, IMF programs 
can play a helpful role, which requires that they be structured 
appropriately. The question is not whether conditions should be 
imposed, but what conditions, and how they should be 
determined. Countries shouldn't be stifled by unnecessary and 
counterproductive fiscal tightening or inappropriate structural 
reforms.
    Fourth, the Fund needs to go further in its new 
institutional view of capital account management techniques. 
These should not be viewed only as a last resort. They are 
among the instruments that many countries will need to draw 
upon in this world of financial instability.
    Fifth, the IMF has come to increasingly rely on surcharges 
on borrowing countries to finance its operations. This is 
inappropriate and counterproductive. The IMF was supposed to 
help countries dealing with foreign exchange problems. It is 
now contributing to their foreign exchange problems through the 
surcharges.
    I have focused my remarks on global economic and financial 
risks. These could compound the political turmoil around the 
world that is so evident.
    The U.S. plays a critical role with the IMF. We are the 
only country with veto power. We will be held accountable for 
the successes and failures of the IMF. What I shall call for 
shorthand the, ``old IMF,'' won few friends and made many 
enemies. It was marked by hypocrisy, with advanced countries 
employing countercyclical policies as it demanded that others 
engage in procyclical policies.
    We live in a different world than we did 2 decades ago. It 
is imperative that multilateral institutions adapt to these new 
realities. I hope my brief remarks will point the way to how 
that might best be done.
    Thank you.
    [The prepared statement of Dr. Stiglitz can be found on 
page 69 of the appendix.]
    Chairman Himes. Thank you, Dr. Stiglitz.
    Professor Rogoff, you are now recognized for 5 minutes.

  KENNETH ROGOFF, THOMAS D. CABOT PROFESSOR OF PUBLIC POLICY, 
                       HARVARD UNIVERSITY

    Mr. Rogoff. Thank you very much for the honor of speaking 
to the subcommittee. And I am following a number of excellent 
remarks and excellent points.
    As the only truly global multilateral financial 
institution, the International Monetary Fund is needed today as 
much as ever.
    The Fund's activities have multiple facets. These include 
its essential surveillance activities, including macroeconomic 
and financial forecasts for the entire world. Unlike private-
sector forecasts, the Fund's work is distributed for free, and 
it is highly valued, especially in poorer countries where there 
are few alternatives.
    The Fund is also a reservoir of global macroeconomic and 
financial data, again, made widely available. They have made 
major steps forward--also the World Bank--in work on debt-
reporting transparency, which had been a weakness in the run-up 
to 2008, and is now a growing strength. This includes, 
importantly, increased transparency over China's massive 
lending activities.
    The Fund's single-most important and unique activity is its 
role in lending to debt-distressed economies. Although best 
known for programs in emerging markets and lower-income 
countries, the Fund played a large role in the European debt 
crisis over the last decade. Not as new as one might think, the 
U.K. alone had 11 IMF programs from 1950 to 1970.
    Today, the focus is shifting again, as the search for yield 
has allowed many lower- and middle-income countries and 
developing economies that once relied exclusively on official 
and concessional lending to access private markets.
    Unfortunately, the situation has now become dire for these 
newer borrowers, with over 60 percent of lower-income countries 
in debt distress, and a handful of emerging markets, including 
Argentina and Lebanon, already in default. If U.S. interest 
rates were to rise more sharply then markets, perhaps naively, 
think: This could cause problems in many more emerging markets. 
Turkey is going to be a problem regardless.
    True, many emerging markets will become more resilient, 
thanks to more foreign exchange reserves and a marked shift to 
borrowing in the local currency and, more importantly, under 
domestic debtor-country legal jurisdiction. This gives 
governments considerably more agency over debt workouts, should 
they be needed, with foreign creditors. I have been arguing for 
this change for over 3 decades.
    Nevertheless, a sufficient rise in global interest rates 
will place stress even on many of these borrowers, as well, 
because there is still massive emerging-market corporate 
borrowing in dollars or euros under New York and London law.
    Let me conclude with four points.
    First, the Fund is a revolving credit agency with loans 
that typically need to be repaid within 2 to 4 years. It can 
forgive loans, but only if its main hard currency shareholders 
stand ready to replenish its resources.
    Second, the Fund is at its best when it plays the role of 
the honest broker, whether in its routine forecasts and policy 
advice or its design of bailout programs.
    Sometimes, however, the most realistic advice is that a 
country needs to restructure its private debts, but the Fund is 
not legally allowed to specify that. Its only tool is to avoid 
lending in the situations it deems unsustainable. But it often 
gets gamed into making excessively-optimistic forecasts about 
growth and compliance. This happened yet again in Argentina, 
and it is a serious risk going forward in trying to exit 
pandemic-era loans.
    In general, advanced countries must be prepared to make 
vastly larger aid programs--outright grants, not loans--than 
currently envisioned. And here, I certainly agree with many of 
the other speakers. The two emergency SDR issuances, during the 
global financial crisis and again during the pandemic, on 
balance made sense. Plans to reallocate a large share to poor 
countries, or some share, if successful, is welcome.
    But SDR allocations are far too crude an instrument to be 
used as a routine aid instrument. And one of their main 
advantages, lack of transparency to shareholder taxpayers, will 
inevitably get stripped away if used too routinely.
    Lastly, the problem of helping developing countries control 
their carbon footprint as they develop is probably beyond the 
scale and expertise of either the IMF or the World Bank, but 
they can play a supporting role. I believe there is a case for 
creating and funding a world carbon bank to help countries, for 
example, phase out coal plants and facilitate transfer of 
technology.
    Thank you very much for the opportunity to address the 
subcommittee.
    [The prepared statement of Dr. Rogoff can be found on page 
53 of the appendix.]
    Chairman Himes. Thank you very much, Dr. Rogoff.
    I now recognize myself for 5 minutes for questions.
    I want to devote my 5 minutes to an issue where I find I 
part company with my Republican friends. And I usually agree 
with my Republican friends on all sorts of things; it might be 
the balance between austerity and sustainability, SDRs. I am 
just so puzzled, though, by the fact that every hearing of this 
committee begins with an indictment of those financial 
institutions which are addressing what, as Ms. Segal pointed 
out, Swiss Re deemed to be the, ``biggest long-term threat to 
the global economy.''
    It particularly surprises me because when we are talking 
about the National Flood Insurance Program, when it is taxpayer 
dollars that are on the hook, my Republican friends urge 
caution and a very, very thoughtful evaluation of risk so that 
we are not underwriting projects that don't make sense from a 
coastal risk standpoint.
    I want to explore that a little bit.
    Ms. Segal, you brought forward Swiss Re--Swiss Re, of 
course, is a global insurance company. And I will say it again: 
They say that climate change is the biggest long-term threat to 
the global economy.
    Ms. Segal, in a minute or two, make the case and give an 
example of how the IMF might--were it to completely ignore the 
risks associated with climate change, where it could take risk 
that would ultimately damage both the lender, the IMF here, and 
the borrower?
    Ms. Segal. Thank you, Mr. Chairman, for the question.
    And I appreciate that you pulled out the reference that I 
made to Swiss Re, because I think the important point here is 
that it is a private-sector entity making that claim. And I 
also included in there the Financial Stability Board.
    The point being that the world is taking on climate change 
as an economic risk in their operations. There is basically no 
escape from the fact that there are economic consequences to 
climate change. And the actors in the global economy are making 
those adjustments.
    So, for the IMF to not be paying attention to climate as a 
macrocritical issue, and to not reflect that in its 
surveillance activities, and to not, kind of, move in the same 
direction, where appropriate, in its lending activities, would 
basically make the institution irrelevant in this issue.
    Chairman Himes. Ms. Segal, bring this home for the 
layperson watching. Give us an example--if my Republican 
friends' philosophy prevailed and the IMF made loans and 
undertook its activities without any consideration of what 
Swiss Re is calling the biggest long-term risk to the economy, 
what would be something that the IMF might do that could 
ultimately prove catastrophic? Just give us a real-world 
example.
    Ms. Segal. It is precisely the case that Professor Rogoff 
made, that it is a lending institution with revolving 
resources; it has to be repaid.
    So, if it is in the business of making loans to countries 
whose economic stability is undermined because of climate 
change--let's take a large carbon-energy-source exporter. If 
the financial viability of that economy is dependent on a 
resource that is suddenly unviable, nobody is wanting to buy 
those carbon-intensive resources, that actually leaves the Fund 
on the hook with very bad credit.
    That is kind of a single example, but to the extent climate 
change is just a pervasive issue--
    Chairman Himes. I am sorry to interrupt, Ms. Segal, but 
thank you for that specific example.
    But, yes, not just the Fund--and, at the end of the day, 17 
percent of that is our money--but also the country that 
borrowed the money. The country that borrowed the money is now 
in a terrible place because they have built an asset without 
any consideration of what that asset might look like 20 years 
down the road, which can cause an immense amount of pain to the 
borrower as well, correct?
    Ms. Segal. Yes. And that is probably a more concise and a 
better example to give.
    But it is the fact that these risks are, kind of, impacting 
every economic actor. To ignore them would actually be at our 
own peril.
    Chairman Himes. Thank you.
    Dr. Rogoff, I read carefully what you said here in your 
testimony, that the problem of helping developing countries 
control their carbon footprint is beyond the scale and 
expertise of the IMF.
    I hope that is not true, but let's stipulate that it is 
true. If Swiss Re is right and this is the single biggest long-
term threat to the global economy, at a minimum, don't you 
believe--I will ask you to sort of think of yourself as a board 
member of the IMF or of a financial institution--don't you 
believe that it should be at the very core of the IMF or any 
financial risk institution to take into account projections of 
risk associated with climate change?
    Mr. Rogoff. As far as I know, the IMF has made a big point 
of saying they don't see an end game to this without a global 
carbon tax, by the way, as being really the number-one thing 
that needs to be done.
    But, yes, the question is, do they have the expertise? Do 
you give them the funding? And I think it is an interesting 
question about the SDR. That question has been raised. How do 
you give aid? There needs to be massive amounts of aid.
    I don't really think the IMF and the World Bank are ideally 
tuned to do that. But, yes, it is certainly good to shame Japan 
if they--
    Chairman Himes. Dr. Rogoff, I am out of time. My question 
was actually whether they should incorporate future risk 
associated into their underwriting decisions. That was all I 
was asking.
    Mr. Rogoff. I think that is questionable, whether that 
should be--40 years from now, they are not going to be able to 
repay it, and then they will keep rolling over the debt.
    I am totally on board for fighting climate change, but I 
find that argument a bit of a stretch.
    Chairman Himes. Okay. Thank you.
    I am well over time, so I now recognize the distinguished 
ranking member, Mr. Barr, for 5 minutes of questions.
    Mr. Barr. I thank the chairman.
    And I wish I had time to get into this climate change issue 
at the IMF. I would just say one thing, one editorial comment. 
I appreciate the chairman's focus on that. I just would say 
that it is difficult to just make the assumption that lending 
into a carbon-intensive industry is actually counterproductive 
to the fight on climate change, when lending could, in fact, 
provide capital to companies that have the expertise to make 
investments in technology and innovation that actually could 
fight climate change, harness the carbon cycle, and innovate in 
carbon capture and things like that.
    So, starving energy companies of capital or starving 
countries of capital that are engaging in investments in fossil 
energy could actually have a counterproductive effect in terms 
of fighting climate change. But I don't have time to go into 
that.
    Let me talk about economic reforms and conditionality, 
because I think that is very important when we talk about the 
role of the IMF.
    And one of the primary roles of the IMF is to drive 
meaningful, pro-growth, economic reform. These economic reforms 
associated with IMF lending help struggling economies prosper 
in the long run, not just because of the funds loaned 
directly--
    [Audio interruption.]
    Chairman Himes. Mr. Barr, let me ask you to suspend. Your 
last 20 seconds did not--I could not hear you.
    Could the other members of the committee hear Mr. Barr?
    Okay, I am seeing shaking heads.
    I am going to ask the staff to run the timer back 20, 25 
seconds or so.
    Sorry, Mr. Barr. You just cut out. I think you may want to 
try again. You might want to back it up about 20 seconds or so.
    Mr. Barr. Thank you, Mr. Chairman. I apologize. There was a 
call coming into my phone, and I am using my phone because I 
was having technical problems. So, thanks for the additional 
time. I will restate my question.
    One of the primary roles of the IMF is to drive meaningful, 
pro-growth, economic reform. The economic reforms associated 
with IMF lending help struggling economies prosper in the long 
run, not just because of the funds loaned directly from the 
IMF, but because they have a catalytic effect that provides 
private creditors the confidence to lend into a particular 
economy. This private credit, in turn, amplifies the capital 
pledged by the IMF. Put another way, absent concrete economic 
reforms, private lenders will be hesitant to invest in 
struggling economies.
    Professor Rogoff, do you agree? And can you elaborate on 
why economic reforms and this idea of conditionality is 
important when the IMF is negotiating these loans, especially 
as it relates to the long-term growth and recovery of 
struggling economies?
    Mr. Rogoff. Thank you.
    Look, for starters, when we are talking about the really 
poor countries of the world and the ones that are most-
distressed, they need aid. They don't need any sort of loans. 
Although, they also need technical assistance and help.
    But if you get into the larger emerging markets, there is a 
lot of Chinese money, there is a lot of private money. And when 
the IMF comes in, it is often because these other lenders have 
dried up, and they are not giving money.
    The, ``austerity,'' of many IMF programs--and I don't argue 
that they can be designed better in some cases, but it is 
coming with or without the IMF. That seems to be little 
understood. The IMF, in these cases, mitigates austerity.
    But I think a big problem--and many speakers have alluded 
to this; Professor Stiglitz did and others--is that the IMF is 
legally restricted from saying, ``This isn't going to work. We 
could give you money, but it is not going to work. It is not 
realistic in the growth. It is not realistic in the compliance. 
You need to get rid of some of this debt first.'' And they are 
not allowed to say that. That is sort of a problem with the 
current structure.
    Thank you.
    Mr. Barr. Thank you for that.
    Let me talk about surcharges. Some of my colleagues on the 
other side, including several on this committee, sent a letter 
last month to Treasury Secretary Yellen that labeled IMF's 
surcharge policy, ``unfair and counterproductive.'' They called 
for these surcharges to be abolished.
    However, according to media reports, the Biden 
Administration has rejected these Democrats' request, citing 
the importance of surcharges for the IMF's precautionary 
balances.
    To any of the witnesses: Why are surcharges important for 
the IMF, and why might the Treasury Department have opposed 
their elimination?
    Professor Rogoff, can you comment on that?
    Mr. Rogoff. I think, after the pandemic, there is a real 
question of, if they should have done something different with 
the surcharges. I am not talking about Argentina, but some of 
the other countries. Because the idea is not just to help the 
IMF's balances but to encourage countries to repay, because it 
is revolving credit.
    But the pandemic was truly an extraordinary situation, and 
to the extent it affected some of the poorest countries, I 
think there is an issue there.
    But as a routine matter, believe me, the surcharges that 
China is charging and that the private creditors are charging 
are far greater.
    Mr. Barr. Speaking of China--
    Ms. Ghosh. If I could just to add to that, the IMF's own 
economic model specifies that they do not need the surcharges 
for their precautionary balances. And it is a really tiny 
amount relative to the capital base and the lending program of 
the--
    Mr. Barr. Let me shift back to China.
    In the past, some have argued that China needed greater 
importance at places like the IMF so that it would commit 
itself to international norms. But in 2015, for example, 
China's shareholding at the Fund was increased, and the IMF 
decided to include the renminbi in the Fund's elite currency 
basket, but Beijing went on to wage genocide in Xinjiang, tore 
up its treaty obligations in Hong Kong, and tightened its grip 
on the central bank, all while continuing its opaque Belt and 
Road lending.
    Professor Rogoff, given these facts, why should Congress 
listen the next time someone argues that China needs a stronger 
voice at the IMF? How can we better hold China accountable?
    Mr. Rogoff. This is a very difficult question. I think, 
back in 2015, they sort of hoped for another trajectory. We 
depend on China to be a big lender. We had hoped they would 
give more money. We wanted to bring them in. But this is a very 
complex issue. I don't think the IMF can necessarily take the 
lead on this, but things are rapidly moving if you look at the 
governance in China.
    Chairman Himes. The gentleman's time has expired.
    Mr. Barr. Thank you, Mr. Chairman.
    Chairman Himes. The Chair of the Full Committee, Chairwoman 
Waters, is now recognized for 5 minutes of questions.
    Chairwoman Waters. Thank you very much.
    I would like to direct my question to any of the witnesses 
who would like to respond to it.
    This is where the IMF draws the line on the question of 
respecting a country's sovereignty: ``The IMF has adopted a 
policy by means of a legal opinion that it not will not take 
political considerations into account in determining a 
country's eligibility for assistance.''
    The IMF, as well as the World Bank, has used this political 
clause as justification, for example, for not insisting that a 
country adopt internationally-recognized poor labor standards, 
as the Fund views these standards, such as freedom of 
association, as an interference in the political affairs of a 
country.
    On the other hand, both the IMF and the World Bank have 
consistently intervened in a country's labor market policies by 
encouraging, ``labor market flexibility,'' a euphemism for 
policies that make it easier for firms to fire workers and 
dilute the power of unions to negotiate on behalf of workers.
    But people like Stanley Fischer, the former first deputy 
managing director at the IMF, has candidly acknowledged that 
there are limits to political tolerance, noting that a country 
such as Nazi Germany would not, on political grounds, have been 
eligible for IMF assistance.
    I would appreciate hearing the views of any of our 
witnesses on this issue. Where is the line drawn between a 
government's sovereignty and the Fund's macroeconomic and 
fiscal mandate, with respect to labor rights, human rights, or 
crimes against humanity?
    Mr. Sembene. If you allow me, Chairman Himes, I would like 
to respond to this question by Chairwoman Waters.
    I certainly agree with you that the IMF needs to be 
respectful of countries' sovereignty. I think it is clear that 
the institution should not be interfering politically in 
sovereign countries.
    The IMF has--and as a former board member, I can say this--
the obligation to advise whenever there is a decision, whether 
it is political or any type of decision, that has some effect 
on the macro stability of the country. If, for instance, there 
was an issue about labor standards that have a macroeconomic 
effect that may actually jeopardize macroeconomic stability, 
the IMF has a duty to intervene.
    But, certainly, there is something that is important that 
we need to keep in mind: The institution, to be effective, has 
to be rules-based. And I think this is also, actually, a 
response to the previous question by Ranking Member Barr.
    If China has received and enjoys its quota share, it is 
because, according to the IMF rules, there is a need whenever a 
country actually has an increasing economic [inaudible] in the 
global economy to benefit from additional quota shares. And 
even regardless of that, at the IMF, of course, China is still 
underrepresented.
    It is to say that it is important to make sure that the IMF 
is rules-based and to be respectful of the countries' 
sovereignty.
    Chairwoman Waters. Would anyone else like to weigh in on 
that?
    Mr. Stiglitz. Yes. I want to second the point about the 
importance of a rules-based international order. And part of 
that rules-based international order is we have a set of 
international conventions, agreements, and the like, against 
child labor, the core labor standards, and I think adherence to 
those core standards is actually part of the safeguards that 
are put into most of the lending of the multilateral financial 
institutions.
    They sometimes have not implemented them effectively. And 
there have been particular problems at the International 
Finance Corporation (IFC) and in some of the more private-
sector-oriented, where they have not adequately respected labor 
standards and the right to collective bargaining. And, 
obviously, I think they should be more forceful in recognizing 
those international standards.
    Chairwoman Waters. Can we agree that the IMF does respect 
sovereignty, but there are some conditions that should be 
adhered to, and this may be considered interference, but it is 
not absolute that there is no interference based on the 
criteria that has been developed to be eligible? Is that 
something that maybe we can conclude?
    Mr. Stiglitz. I hope so. The framework that Dr. Sembene 
reported--we are trying to create a rules-based rule of law 
internationally, both with respect to raising funds, voting 
rights, and for labor standards.
    Chairwoman Waters. Thank you, Mr. Himes.
    Chairman Himes. The gentlelady's time has expired.
    Just so the committee and the witnesses know, it looks like 
we have time, and a number of Members are interested in a 
second round of questioning. I think I will have to be a little 
sharper on the gavel if we are going to do that. I have been 
pretty lax in these last couple of questions. So, I am going to 
be a little sharper on the gavel around the 5 minute-mark, with 
the intention of doing a second round of questioning.
    With that, the gentleman from Texas, Mr. Sessions, is 
recognized for 5 minutes.
    Mr. Sessions. Mr. Chairman, thank you very much.
    And to our witnesses, I find each of your testimonies very 
instructive to us as Members to hear your ideas, and I 
appreciate and respect those.
    My questions essentially revolve around exactly where our 
ranking member, the gentleman from Kentucky, was coming from. I 
have a bit of association and knowledge about the Millennium 
Challenge Corporation, which is also a billion-dollar 
organization, although not as large as the IMF.
    They have characteristics about them, much like the IMF 
does, to make sure that there are people who qualify and under 
what circumstances, and we look at that, up to and including 
corruption indicators, values related to gender 
nondiscrimination, as well as how they look up to people to 
build women and women's rights.
    I think what I see and hear from this is a similar question 
but would be really related to--and I don't know how many of 
our witnesses--I don't know that this is a fair question, is 
what I am saying.
    How much money is really going out directly related to what 
I might call climate change, or other circumstances? I don't 
think it is appropriate for us to look at the IMF as 
necessarily--I think they could include a thought process, when 
we engage a particular country, for them to include their 
needs-based answers in their applications.
    But I wonder how much money is really going out in other 
funds that are asking the same questions that we are, as 
opposed to us looking at the IMF and what our characteristics 
and models should be.
    This is a question to any of the participants who are our 
witnesses today. How big are all of these funds that are going, 
and is there someone else who really should be doing 
necessarily related to global changes with economics and 
related to climate change?
    Ms. Segal. If I could take that question first--
    Mr. Sessions. Yes, ma'am. Thank you.
    Ms. Segal. In my written testimony, and also in my oral 
comments, I really put the focus on the Fund's role with regard 
to climate on its surveillance activities. And so the short 
answer is, I believe surveillance is where the Fund can 
actually be most effective. Its ability to monitor both at the 
country level, and then tie it back to how it affects the 
multilateral system, that is where I think the Fund can add the 
most value.
    There are efforts to kind of experiment, and the RST is one 
of them, to recognize climate as a macrocritical issue and see 
where the Fund can help mobilize funding from institutions and 
the private sector toward climate ends. I think that is an 
additional role that the Fund can play. But per your question, 
I would really put the focus on the Fund's work here in the 
surveillance area.
    Mr. Sessions. Anyone else?
    Mr. Sembene. May I add something to this question?
    Mr. Sessions. Yes, sir.
    Mr. Sembene. Thank you, Congressman.
    I would remind you that the IMF is in the process of 
putting in place what it calls the Resilience and 
Sustainability Trust, but this is going to be a $50 billion 
trust based on the SDRs that will be rechanneled to the IMF. 
And let me tell you: If you want to look at the impact on 
climate change at the global level, I would believe that would 
be minimal because of the amount that we are talking about, 
because of the size of this trust.
    But it is going to be important for those eligible 
countries, whether they are low-income countries or middle-
income countries, to benefit from those resources. And I will 
tell you why quickly, because most of those countries--and I am 
actually from one of those countries--are facing calamities 
that are actually extraordinary and that are having a large 
impact on their budgets. There is coastal erosion. There are 
droughts. There is flooding. There is, I guess, everything that 
you can imagine that is actually a ramification of climate 
change. So, by receiving some support from the IMF and whatever 
other funds that take care of climate change, they certainly 
would have some sort of relief.
    But at the global level, of course, this will be quite 
limited, the impact would be quite limited, because these 
countries, low-income countries and middle-income countries, 
actually are little and small polluters and they certainly do 
not contribute much to global pollution.
    Mr. Sessions. Dr. Rogoff?
    Ms. Ghosh. If I could--
    Mr. Rogoff. Indeed, I--
    Ms. Ghosh. --just add very briefly--
    Mr. Rogoff. Sorry. Go ahead.
    Mr. Sessions. I'm sorry. Professor Rogoff--
    Ms. Ghosh. Yes, if I could just add very briefly, just to 
repeat--
    Mr. Sessions. Yes, ma'am.
    Ms. Ghosh. --the RST fund, it is too small. It is limited 
to debt, which is a mistake; it should be grants. And it should 
be available to all countries. And it should be much, much 
larger, based on the climate adaptation and mitigation needs.
    Mr. Rogoff. I would just second the point that we need much 
more money. I don't think it should go through the SDR, myself.
    And I would point out that if we want to stop pollution, 
look at the coal-burning plants in Asia and try to figure out 
how to phase those out faster, and share technology.
    I think the funds involved in coaxing countries and helping 
them do this are vast, much bigger than we have been talking 
about, but I think we need to start talking about it.
    Mr. Sessions. Mr. Chairman, once again, you have seen to it 
that the witnesses that you and Mr. Barr put together have 
provided, I think, positive references and indications. And I 
appreciate this hearing, and I appreciate the witnesses and 
your making this such an available hearing.
    I yield back my time, Mr. Chairman.
    Chairman Himes. Thank you, Mr. Sessions.
    The gentleman's time has expired.
    The gentleman from Guam, Mr. San Nicolas, is recognized for 
5 minutes.
    Mr. San Nicolas. Thank you, Mr. Chairman.
    Greetings, Chairwoman Waters, and hello to my colleagues.
    And thank you to the witnesses who are testifying before us 
today.
    I really appreciate the big-picture approach and the 
conversations that we are having. I am particularly keen on the 
conversation about climate change. And I would like to focus my 
lens a little bit more on the impact of climate change with 
respect to the region that I represent in the South Pacific.
    To the south of Guam, we have several small island 
countries--the Republic of Palau, the Federated States of 
Micronesia, and the Republic of the Marshall Islands. And these 
small countries enjoy a unique relationship with the United 
States through the Compact of Free Association and the treaty 
that represents.
    These small countries would not have a dramatic effect on 
the overall economy as they suffer through climate change. That 
is just the reality. They don't play big roles in international 
trade or international finance.
    But the reality of climate change in those types of 
communities is catastrophic when you look at what they are 
going through. The Republic of the Marshall Islands, for 
example, the recent king tides that swept through there 
literally had water washing over entire atolls of that 
particular country.
    The IMF, of course, focuses on big-picture issues and big-
picture solutions, but when we have climate change impacting 
these smaller nations and the access of resources or to 
resources to address the climate change impact is far more 
limited for these smaller nations, I really sit back and ask 
myself, what more can we be doing to help them mitigate the 
impacts of climate change, whether or not we are going to be 
able to actually offset it by attacking the issue and the much 
larger contributors to the problem?
    So, I wanted to ask the witnesses present, do you believe 
that the IMF should tailor specific climate change resiliency 
support to these smaller nations? And, if so, how do you think 
we should structure those types of support?
    I will go ahead and start with Mr. Sembene.
    Mr. Sembene. Thank you very much, Congressman.
    I fully agree with my co-panelists that the $50 billion 
that is going to be channeled to the IMF to help fight climate 
change and, of course, the pandemic, will be quite small. But I 
actually think that there are two things that we can do to make 
sure that the work of the IMF is effective in helping the 
global community fight climate change.
    First of all, we have, especially the U.S. has, and other 
large shareholders have to make sure that the IMF handles and 
manages these resources in the most effective way by partnering 
with other multilateral development banks, starting with the 
World Bank, to make sure that they can take advantage of their 
expertise to fight climate change.
    The second issue is, we are talking about $50 billion, but 
don't forget that the G20 members have accumulated more than 
$440 billion out of the SDR allocation of $650 billion. So, we 
are talking about money that is sitting there at the IMF not 
serving any purpose. Why wouldn't the G20 accept on top of the 
$100 billion that it has pledged to recycle to add actually all 
of that and use SDRs in the IMF to allocate it to the fight of 
climate change? I think that would be the best way and the most 
effective way to mobilize more resources.
    And not necessarily through the IMF. It can go through the 
World Bank. It can go through regional development banks like 
the Inter-American Development Bank (IDB) or the African 
Development Bank. But I think that would be the most effective 
way to mobilize more meaningful resources toward the fight 
against climate change.
    Thank you.
    Mr. Stiglitz. Can I add one more thing to that?
    I think the point that has just been made, that while a 
little money to these small countries can make a very big 
difference to those countries, from a global point of view, it 
is not a lot of money.
    I want to make two other comments very briefly. The SDRs 
are not a perfect instrument, but they are an instrument that 
we have. And there is an urgency, particularly in some of these 
islands, for taking actions very quickly.
    Mr. San Nicolas. Yes.
    Mr. Stiglitz. That is why I support this annual issuance of 
SDRs in the amount of $200 billion or $300 billion a year that 
would make a very big difference, even if it is not perfectly 
targeted.
    Over the long run, I really strongly agree with my 
colleague, Ken Rogoff, that we need a global institution to 
focus on climate change, but that is not going to happen 
overnight. We need to have more grants, not loans. But until we 
get these better-designed institutions, let's use the 
institutions, the instruments that we have to make sure that 
these countries are not devastated.
    Mr. San Nicolas. Thank you, Mr. Chairman. My time has 
expired. I yield back.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman.
    China isn't transparent. It cannot be trusted with much of 
the information it shares with the world. We saw this with 
COVID-19 and their reluctance to allow any international body 
to come in and get to the bottom of the origins of the 
pandemic. They take a similar posture to the world with some of 
their lending practices, which are also often hidden and 
obscured.
    If China is willing to offer money to troubled economies 
and trap them into debt with little transparency to the outside 
world, then the IMF really is no longer the true lender of last 
resort.
    So, Professor Rogoff, what pressure points do we have at 
our disposal so that we can get greater transparency into 
China's lending practices?
    Mr. Rogoff. There really has been some significant progress 
on that in the last couple of years, in getting more 
transparency about the Chinese loans, particularly in work from 
the World Bank.
    That said, now that we have the greater transparency, we 
see that they are lending at private-sector terms. They are not 
writing down debt when they lend into a really poor country and 
it is in deep distress. They just roll it over. You pay a 
penalty, interest, and it is not really resolved. This is a 
huge, unresolved problem.
    Certainly, in the IMF, in designing aid, loans, anything, a 
big concern is to make sure that it is not used to give the 
Chinese more favorable conditions than, certainly, the Fund is 
getting, and the World Bank and other official creditors. And 
you can start by providing transparency.
    But I think where the Chinese will run into trouble, and we 
have over the years is, yes, everybody is your friend when you 
are lending the money, and you are building the Belt and Road 
project and giving loans--often, with a lot of corruption mixed 
in, by the way--but then, when you want to get it back, you 
find your leverage is much less.
    Mr. Williams of Texas. That is right. And, of course, China 
invests to get these people indebted to them.
    The more the IMF involves itself in the politics of climate 
change, the less credibility I believe it gives them around the 
globe. We saw how they adjusted the economic forecasts of 
Brazil and Japan for climate-related measures while turning a 
blind eye to some of the worst polluters in the world, like 
China. We have mentioned some others today. Now, their actions 
are obviously not driven by the facts on the ground but, 
rather, to carry out a political agenda.
    So, again, Professor Rogoff, can you talk about some of the 
negative consequences if the IMF continues to operate outside 
of its mission and it gets involved in this unrelated task 
called climate change?
    Mr. Rogoff. I don't have any problem with the IMF keeping a 
scorecard of the way it provides other data. I think the 
International Energy Agency (IEA) has much more expertise 
generally in the area, although they are not really a global 
institution the way that the IMF is. The IMF can use it. I 
think they can do that.
    I don't want to apologize, exactly, for the IMF, but I 
would say that, since this is new, it is not exactly easy to 
decide exactly how to calibrate the advice and what they should 
say. There is not a lot of precedent. So, I hesitate to destroy 
the whole idea of saying something about climate because maybe 
they fumbled in a couple of cases.
    Mr. Williams of Texas. Okay.
    Elizabeth Warren and Bernie Sanders--we have all heard of 
them--have called for an additional $2 trillion of special 
drawing rights for the IMF to deal with poverty, hunger, and 
disease across the world. This massive increase in funding 
would seem to be outside of the normal bounds of the IMF and 
more in line with some other international institutions' 
purview.
    So, Professor Rogoff, can you elaborate on why the IMF 
would not be the appropriate institution to try to deal with 
some of these broad humanitarian goals?
    Can you hear me?
    Mr. Rogoff. I just think the World Bank, for starters, has 
more in this area. The SDR is housed in the IMF. I think it is 
possible, as has been mentioned by one of the other speakers, 
that you could issue the money through the IMF and have it 
dispensed by the World Bank.
    But I think it is a very crude instrument, and I think we 
need to do something now about having something more focused. 
And I do worry it is a distraction from the IMF's central 
focus. It is hard to be both an aid agency and the revolving 
lender. People say, well, they can do both. I think that is 
actually very hard.
    Mr. Williams of Texas. Okay.
    I yield my time back, Mr. Chairman. Thank you.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Massachusetts, Mr. Lynch, is recognized 
for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman. And you and the ranking 
member have really put together a distinguished panel here, and 
I am grateful for the testimony of all of our witnesses, and 
for your willingness to lend your considerable talents to 
helping the committee do its work.
    I want to try to address something that I think might be--
and I may be wrong--more workable in the near term.
    Professor Ghosh, we got into this issue about surcharges on 
so-called middle-income countries. And, just to be clear, we 
are talking about Ukraine, we are talking about Egypt, 
Argentina, Brazil. There hasn't been any relief for those 
countries in terms of the surcharges that have been applied by 
the IMF. And I am told that during the period of this pandemic, 
there will be about $4 billion paid by these countries to the 
IMF in terms of surcharge fees.
    Forgive me, but it would seem that it would be reasonable, 
just during this period that we are dealing with the pandemic--
and all of these countries, I think, have about 25 to 30 
percent of their population vaccinated, so two-thirds of the 
country is not. They are struggling. And they are asking, in 
many cases, just for a pause in the application of these 
surcharges.
    Would it not be reasonable to ask the IMF--and I know about 
the revolving-fund nature of this. I understand that, and I 
appreciate that. But, given the circumstances, would this not 
be an opportunity for us to show a little bit of reasonableness 
and sensitivity to these situations, to suspend for the short 
term? We seem to be coming out of this pandemic eventually, 
hopefully. Couldn't we suspend that without upsetting the 
balance of the IMF?
    Ms. Ghosh. Thank you for this question. And you are 
absolutely right. I absolutely agree with you. I would argue 
that there is really no logical reason for the surcharges.
    The ostensible reason is that it is to prevent countries 
from taking on too much debt or holding onto IMF loans for too 
long. But both are of these are in the hands of the IMF. The 
IMF decides how much they are going to lend to a country, and 
then it punishes that country for taking too large a loan.
    This has nothing to do with the revolving fund. This is an 
additional charge, which really even for its own operational 
balances is not necessary.
    And it punishes countries precisely when they least need 
it. At the moment, Argentina spends more on surcharges than it 
would to vaccinate its entire population. And this is true of a 
number of other countries.
    It is a completely unnecessary kind of imposition on 
countries that are very distressed and cannot afford it. So, I 
completely agree with you.
    Furthermore--
    Mr. Rogoff. Can I--
    Ms. Ghosh. --it is, yes, this pandemic, but we are facing 
major climate challenges as well. So, there is really no 
justification for surcharges which are punishment for decisions 
made by the IMF itself. And I believe they should actually be 
abolished.
    Mr. Stiglitz. Can I have one more point, which is that they 
are not--
    Mr. Lynch. Please do.
    Mr. Stiglitz. --based on any actuarial basis. So, they are 
not part of a precautionary basis. They are not a repayment in 
anticipation of nonpayment.
    Ms. Segal. If I could--
    Mr. Lynch. Thank you, Professor Stiglitz, and it's good to 
see you again.
    Please, Ms. Segal, go ahead. I'm sorry.
    Ms. Segal. Thank you. I'm sorry to cut you off.
    I just wanted to say, on surcharges, they do serve a 
purpose for IMF operations, first to build precautionary 
balances. The IMF has a plan for achieving a precautionary 
balance, and surcharges are what goes to fund that, so there is 
a purpose there. That should be part of the analysis.
    And the second purpose, actually, is to maintain the Fund 
as a lender of last resort. And that means that it is not, kind 
of, the cheapest source of financing there, and you wouldn't 
want to be in the business of encouraging countries that 
otherwise don't need to go to the Fund, to go to the Fund. So, 
there is a purpose behind the surcharges.
    I would say, if the issue that we are really concerned 
about is debt--and that has been kind of the theme throughout 
the hearing--that is what should be dealt with in a 
comprehensive nature, knowing that whatever policy is decided 
should be, kind of, across the membership.
    I think the discussion needs to be on how Argentina and 
others need to deal with their debt issue, and not, kind of, 
pick off surcharges as the issue to be dealt with.
    Ms. Ghosh. If I could very quickly respond?
    Chairman Himes. Very, very quickly. The gentleman's time 
has expired. Professor Ghosh, very quickly.
    Ms. Ghosh. Yes. The IMF's own model in the World Economic 
Outlook specifies that surcharges are not required for its 
operational balances. It is actually meeting it without the 
surcharges.
    And the other issue is that the reason China is successful 
in lending to so many countries and making itself attractive is 
because the IMF and others are becoming so expensive in many 
ways, in terms of the surcharges, in terms of conditions that 
make it very difficult to do countercyclical policies.
    So, if you really want to make China less important as a 
global lender, we have to make these sources of multilateral 
lending more available and attractive.
    Mr. Lynch. Thank you.
    Thank you, Mr. Chairman.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Arkansas, Mr. Hill, is recognized for 5 
minutes.
    Mr. Hill. Thank you, Mr. Chairman. Thanks for having this 
hearing, and the witnesses are outstanding. I enjoyed very much 
reading their testimony.
    Two weeks ago, Senate Democrats sent a letter to Majority 
Leader Schumer calling on him to support the $900 billion 
equivalent of special drawing rights to be included in this 
year's appropriations bill. That passed the House on a party-
line vote last July. I said this when I voted against the bill 
last summer, and I will say it again: In my view, using SDRs in 
this manner is a mistake.
    Just last August, the IMF sent half-a-billion dollars to 
the Taliban in Afghanistan as a part of its general allocation 
of last year's $650 billion equivalent allocation. Thanks to 
the efforts of Republicans on this committee, while no SDR has 
made it to the Taliban, $42 billion was allocated to the 
corrupt Chinese Communist Party; $18 billion, as you noted, Mr. 
Chairman, to menacing Russia, poised on another invasion; $5 
billion to Iran, the state sponsor of terror; $1 billion to 
Belarus, Putin's co-conspirator; and $400 million to Assad in 
Syria, the mass murderer. Only in Washington can this be 
considered common sense.
    And as we have talked about today, some who advocate for 
SDRs as a foreign development aid tool or turning SDRs into a 
climate bank--again, in my view, this is not the right way to 
strengthen global economic recovery and reduce global poverty. 
SDRs really do neither of these things. They are too blunt an 
instrument.
    SDR allocations are not targeted, tailored, or tied to 
COVID injury. There are no conditions for how a government can 
use SDRs, no accountability. They never have to be repaid. They 
are a blank check, as Mr. Sembene said, to wealthy nations. As 
he noted, $440 billion of the $650 billion goes to the 
wealthiest countries.
    Secondly, it is due to this allocation based solely on 
shareholding that I think does not help the poorest countries.
    Last summer, I warned Secretary Yellen of all these issues. 
That advice and counsel fell on deaf ears. I suggested: Do a 
special allocation of SDRs to the poor for COVID. Get the board 
to agree to that, not a general allocation. Insist on 
concessions and guardrails in advance of the allocation. Insist 
that countries belong to the Paris Club, as Ms. Segal 
suggested. Put up transparency guardrails. Make sure you can't 
use SDRs for debt repayment. Make sure they can't be traded 
with rogue nations for hard currency. Exact these technical 
commitments for rechanneling SDRs in advance of that 
allocation. None of those things were done in writing in a 
committed way.
    And for all these reasons, that is why I have introduced 
the Special Drawing Rights Oversight Act, which would limit the 
Executive Branch's ability to bypass Congress to authorize SDR 
allocations by limiting the size and frequency of allocations 
unless Congress authorizes them by law.
    Treasury has broad authority to circumvent Congress and 
unilaterally approve SDR allocations. My bill would ensure that 
there is a proper check on the Executive Branch, and provide 
greater accountability to Congress.
    It is time to stop providing a blank check to our 
adversaries, and a non-rules-based approach to SDRs that are 
unaccountable and untargeted. Let's be strategic and smart in 
the use of this very valuable reserve asset.
    And, as has been noted by Ranking Member Barr, SDRs are 
just one of the challenges with the Fund. Because I agree with 
this conversation that Ken Rogoff highlighted in his written 
testimony, that the SDRs are just one small issue. What is the 
role of the IMF in 2022 and beyond?
    Historically, we are seeing the IMF use its surveillance to 
monitor the stability of the international financial system, 
while the World Bank is focused on poverty reduction and 
sustainable development, along with the regional development 
banks, not the IMF. So, the IMF in this hearing is facing an 
identity crisis.
    The role as traditional lender of last resort, as you 
noted, Mr. Chairman, in your opening statement, has been 
somewhat replaced, as central banks have pumped trillions of 
dollars into the economy and wealthy countries' quantitative 
easing has made the IMF loans functionally obsolete.
    Really, we are seeing recommended today the IMF become a 
donor of first resort rather than its traditional role. In my 
view, we should use the U.S. position to make sure that the 
Fund sticks to its core message.
    I look forward to our continued discussion, and I yield 
back.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Illinois, Mr. Garcia, is recognized for 
5 minutes.
    Mr. Garcia of Illinois. Thank you, Chairman Himes, and 
Ranking Member Barr, for this lively and timely hearing.
    The IMF's role in the world is at a turning point. If we 
are going to take on the pandemic, climate change, and hunger 
successfully, we can't be stuck on the same policies of 
austerity that got us here because of the fact that our world 
has gotten more unequal during the COVID-19 pandemic.
    Here in the U.S., President Biden led a remarkable economic 
recovery based on economic stimulus. I think it could go 
further. But if the IMF is stuck on its old policies of 
austerity, the rest of the world will never recover.
    Professor Ghosh, last year's issuance of SDRs was a 
tremendous success. Dozens of countries have used them to 
finance their response to the pandemic. My bill supporting the 
issuance of $2 trillion in SDRs passed the House, and I hope we 
see more soon.
    But, meanwhile, there is the IMF. Unfortunately, the IMF 
plans to attach conditionality to these recycled SDRs. What 
does the IMF conditionality actually mean for the world's 
ability to recover from this pandemic? And will it undermine 
our ability to get SDRs to countries that need them most?
    Ms. Ghosh. Thank you so much for this question.
    And, yes, I do agree with you that the last year's issuance 
was a success, but necessarily limited, because the amounts 
were not sufficient for the needs.
    What is wonderful about the SDRs is that they are costless 
for the countries that receive them. And the countries that 
don't need them, don't use them, so they do not actually have--
they don't matter for the countries that don't need them. So, 
when we say that so much is going to those countries, it 
doesn't matter. It doesn't really affect global liquidity in 
any meaningful sense. And it is a very small part of the huge 
quantitative easing of $25 trillion that advanced countries 
have engaged in over the last decade.
    So, if we issue $2 trillion in SDRs, still, a small 
proportion of it will go to middle-income and low-income 
countries that really do need it, but it will provide a huge 
buffer. The critical point is that it is not debt. And 
currently, the RST will actually give you debt. And, 
necessarily, with debt, there will be conditions, because that 
debt will have to be repaid.
    It is now important, given the massive climate challenges, 
and given all of the other challenges that we have in meeting 
sustainable development goals, to provide this debt-free money 
to countries that don't need it. Those who don't need it, will 
not use it, so that is fine.
    If we can provide this, it is debt-free, it is costless, 
and it provides a massive buffer even for the reserves in terms 
of other capital flows coming in. It enables countries to meet 
the challenges that are most important for them. It could be a 
climate adaptation challenge. It could be a health challenge. 
It could be whichever is currently the most important challenge 
that they need.
    Mr. Garcia of Illinois. Thank you.
    Ms. Ghosh. And, therefore, a large allocation would 
actually play a huge role in determining a future recovery in 
the global economy.
    Mr. Garcia of Illinois. Thank you very much.
    And to Professor Stiglitz, countries around the world owe 
billions of dollars to the IMF in surcharge fees, all because 
they have too much debt or take too long to repay. To me, this 
looks like the business model of payday lenders here in 
Chicago, not an economic development agency.
    We all know Ukraine is currently at risk of attack from 
Russia. What's more, it has only vaccinated about a third of 
its population. But Ukraine has to pay surcharge fees to the 
IMF.
    Professor Stiglitz, why does Ukraine, one of the poorest 
countries in Eastern Europe, owe surcharge fees to the IMF? And 
do surcharges threaten economic growth in countries like 
Ukraine and undermine the legitimacy of the IMF in an unstable 
world?
    Mr. Stiglitz. You are absolutely right; the surcharges are 
procyclical. They go exactly against the objective of good 
economic policy. As I pointed out in my written testimony, the 
IMF is supposed to help countries with foreign exchange 
problems, but the surcharges are making things worse.
    And our earlier discussion pointed out very forcefully that 
the arguments that have been put forth for the surcharges make 
absolutely no sense. They are not based on actuarial risk. They 
are not needed for building up the precautionary balances. They 
are not needed for the operations of the IMF. And they are not 
needed to stop countries from borrowing from the IMF, because 
the IMF has control over who borrows from the IMF.
    So, all of the arguments that have been put forward for the 
surcharges make absolutely no sense, and they are 
counterproductive.
    Mr. Garcia of Illinois. Thank you, sir.
    With that, thank you, Mr. Chairman, and I yield back.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Ohio, Mr. Davidson, is recognized for 5 
minutes.
    Mr. Davidson. Thank you, Mr. Chairman. And I appreciate you 
putting together this interesting cast of characters to cover a 
really important topic.
    And I will say, we have spent a lot more energy on climate 
than I had expected. Let me just address up front something 
that wasn't really in my plan to spend as much time on.
    But when we look at--Professor Rogoff, maybe you could 
address this. What is the normal timeframe for an IMF loan? And 
I emphasize the, ``loan,'' something that is expected to be 
repaid.
    Mr. Rogoff. Yes. The normal timeframe, outside of a few 
very small programs for the lowest-income countries, is on the 
order of 2 to 4 years.
    Mr. Davidson. My base question is, then, in 2 to 4 years--
when I look at the really, really aggressive climate change 
models, we are talking about sea levels rising at less than a 
centimeter a year. So, do you really think that in 2 to 4 
years, we are going to see something so catastrophic that the 
risk can't possibly be conceptualized or underwritten?
    Mr. Rogoff. Certainly, the private sector looks at that.
    If I could just make one other point. There have been 
complaints about the IMF putting in conditionality. The Chinese 
lend at much higher rates than the IMF does. Why does everyone 
love the Chinese lending? Because there is no conditionality on 
corruption and things like that. They have not been party to 
the Paris Club agreements. And I think you cannot look at what 
the IMF is doing without looking at what China is doing at the 
same time.
    Mr. Davidson. Yes. Thank you for that. And that is a nice 
pivot to the core topic.
    The reality is, of course, people can understand and assess 
risk in that short time horizon, even if you take the most 
aggressive models. I think we could just focus on the loans 
being what they are; they are loans. And the idea, to the 
chairman's point, that somehow this poses some systemic risk to 
the IMF is a fallacy.
    You may say that climate change does pose a systemic risk 
to the planet if you believe the most aggressive models, but 
the idea that the IMF or anyone else lending in a 2- to 4-year 
time horizon couldn't take that into account, to me, is a 
fallacious argument.
    But Mr. Rogoff, last year, I introduced my bill, the 
Chinese Currency Accountability Act. And this bill would make 
any increase in the Chinese RMBs' weighting in the IMF's 
special drawing rights currency basket conditional on Treasury 
certifying that China is complying with key provisions of the 
IMF's Articles of Agreement, the Paris Club, and the OECD 
Arrangement on Officially Supported Export Credits.
    I think it is essential for the United States to do more to 
combat the Belt and Road Initiative by taking actions such as 
this and features that you highlight that are important in IMF 
that aren't embedded in the way the Chinese lend.
    Do you believe this approach could be effective in forcing 
China to become more transparent or to maybe alter their terms 
in their own lending programs?
    Mr. Rogoff. I think Dr. Sembene said very well--and 
Professor Stiglitz as well--that we are trying to have rules of 
the international system, and China has gotten really big for 
its share in the IMF. It kind of doesn't even make any sense. 
It is still way too small.
    So, I'm not sure how we say no--we have been begging them 
to increase their quota, actually. The Chinese have been 
resisting it, because they don't want to be responsible for 
what the IMF is doing. They like keeping a low profile and 
doing their own thing. We are trying to bring them into the 
tent and our rules in this situation.
    Mr. Davidson. Yes. Thanks for highlighting that.
    And I think that is it. They are working on an entirely 
different, alternative architecture that is rife with 
corruption, and it purely pursues China's national interests. 
In fact, China has flaunted their agreement with many of the 
same countries that are part of the IMF, and the World Trade 
Organization. They have never become an actual market economy. 
They are a state-sponsored economy.
    And I want to highlight, Professor Ghosh, at least you are 
transparent in essentially wanting to turn the IMF into a big 
global charity. And I think you also touched on something that 
is really important in saying, look at the rate of quantitative 
easing, which is a word for debasing the currency. Look at the 
global West. How dare we put such vigorous terms and conditions 
on people who are essentially doing the same things that the 
wealthiest countries in the world are doing.
    So, far from austerity, we have debased our currencies 
globally to the tune of $25 trillion to $30 trillion. Shame on 
us.
    And I yield back.
    Chairman Himes. The gentleman's time has expired.
    The gentlewoman from Massachusetts, Ms. Pressley, is 
recognized for 5 minutes.
    Ms. Pressley. Thank you, Mr. Chairman.
    And thank you to our witnesses for appearing before this 
subcommittee today.
    We find ourselves in the third year of this pandemic that 
has laid bare the deadly consequences of weak investments in 
our global public health infrastructure and so much more. Over 
5 million people have died globally from COVID-19, including 
nearly 1 million people here in the United States.
    Our country may be on track towards recovery, but many 
developing countries are still struggling due to the long 
legacy of colonialism, unsustainable debt, and IMF surcharges. 
The IMF surcharges policy, which imposes extra, often hidden 
fees onto countries with high levels of debt, has been widely 
denounced as an unjust burden and a hindrance to our global 
economic recovery by development experts and civil society 
organizations.
    Dr. Ghosh, what are the impacts of surcharges on developing 
countries that are already burdened by unsustainable debt?
    Ms. Ghosh. Thank you so much for this question.
    And, yes, you are absolutely right; these are surcharges 
that are imposed on countries that are already in distress, 
that already do not have the foreign exchange that they need 
for basic imports, that are unable to meet the critical health 
spending that they need in the pandemic.
    And now, they are forced to pay more than they would 
normally or that other debtors are repaying the IMF simply 
because the IMF has this particular rule. It is deeply unjust, 
and unjustified as well, as Professor Stiglitz has already 
pointed out.
    But the economic impact is actually quite brutal. It 
requires the budget to be set aside for this repayment. It 
requires a further drain on very, very limited foreign exchange 
resources that prevent you from importing essential goods, that 
prevent you from doing anything for poverty alleviation and for 
just coping with the pandemic and all of the livelihood losses.
    And it is deeply procyclical, as Professor Stiglitz has 
already mentioned, so it can make a downturn even worse. There 
is--
    Ms. Pressley. Thank you.
    Ms. Ghosh. --absolutely no justification for the 
surcharges, and they really are a big damage to the developing 
countries that have to pay them.
    Mr. Sembene. May I add something to this?
    Ms. Pressley. Yes, please.
    Mr. Sembene. hank you very much, Congresswoman.
    We can agree or disagree on whether surcharges are good 
from an ethical and moral standpoint. We can agree and 
disagree. But I think what matters, also, is actually from a 
fiscal standpoint, if surcharges actually compound and 
aggravate the liquidity issues that countries are facing, so 
that they are having issues servicing their debt, that is 
actually where the problem lies.
    I am saying that because we just had the Debt Service 
Suspension Initiative that was put in place by the G20 expire 
last month, in December, and so far we don't have an 
alternative mechanism--
    Ms. Pressley. Thank you. I am going to run out of time 
here, but I appreciate those answers.
    And there was a recent report which reported that Argentina 
will spend more than $3 billion covering surcharges through 
2023. I want us to sit with that. That is 9 times the amount it 
would cost to vaccinate every single Argentinian against COVID-
19.
    Dr. Ghosh, several governments have called for the 
suspension of these surcharges for the duration of the 
pandemic. Yes or no, given the urgency, do you agree that there 
should be an immediate review of surcharge policy?
    Ms. Ghosh. Absolutely. I believe that right now in the 
continuing pandemic, there should absolutely be a review. I 
believe the IMF should actually cancel this program altogether 
because it really does not make sense--
    Ms. Pressley. Thank you.
    Ms. Ghosh. --and it is not justified, but I believe the 
U.S. Government should actively propose this.
    Ms. Pressley. And, Dr. Stiglitz, do you agree with 
arguments in support of the IMF surcharge policy, claiming they 
offset the risk of non-repayment? Why or why not?
    Mr. Stiglitz. The risk of non-repayment is miniscule. The 
number of loans that have not been repaid is very small, 
because the IMF has what is called, ``preferred creditor 
status.'' They almost always get repaid. And so, the idea that 
these are important for precautionary balances or based on 
actuarial risk is nonsense.
    So, especially in the midst of this pandemic, they ought to 
be suspended, but, as Professor Ghosh pointed out, there is no 
basis for them as part of the long-term framework, because they 
are procyclical and they contravene the basic role of the IMF 
in helping countries with foreign exchange problems.
    Ms. Pressley. Thank you.
    And, Dr. Stiglitz, what is standing in the way of the 
elimination of this onerous surcharge policy? And how can 
Congress work towards achieving that goal?
    Mr. Stiglitz. I think there is a lot of support among many 
other countries. The United States is one of the countries 
standing in the way right now, unfortunately.
    Ms. Pressley. Indeed, surcharges are an obstacle to our 
global economic recovery and our efforts to end this pandemic. 
And I agree, they should be abolished.
    It is also alarming to see the IMF continuing to support 
austerity measures in many of its lending programs during the 
pandemic. The consequences have been deadly. In Ecuador, we saw 
how IMF-backed austerity cuts contributed to one of the 
deadliest outbreaks of COVID-19 worldwide.
    Dr. Ghosh, how might the IMF--
    Chairman Himes. I'm sorry. The gentlelady's time has 
expired.
    Ms. Pressley. I yield back. Thank you.
    Chairman Himes. And we will go immediately into the second 
round. We have reduced the number of Members. We do have an 
administrative hard stop in just over half an hour, so just a 
fair warning to my colleagues that I will be particularly 
aggressive with the gavel at the 5-minute mark, so that we can 
get to everybody in the second round.
    With that, I will very quickly recognize myself for 5 
minutes of questions.
    And I just want to cap off this surcharge debate. It has 
been really interesting, very good. What I haven't heard is an 
affirmative defense of surcharges.
    Dr. Rogoff, I did hear you say that they were lower--the 
surcharges are considerably lower than one would experience in 
the private sector. That is not a ringing affirmative defense.
    But just in the interest of analytical rigor, does anybody 
want to mount an affirmative defense for the existence of 
surcharges?
    Mr. Rogoff. I first want to say that I didn't get a chance 
to speak up, but I really second everything Ms. Segal said in 
her last remarks about how you just have to look at the whole 
picture.
    As I understand it--and Professor Stiglitz is probably much 
more involved in discussing with the Argentines than I am, but 
they have arrived at a program where they are not actually 
making payments on any of this stuff. It is being re-lent. And 
there is going to be some big negotiation, possibly not coming, 
I think, until 2026 when all the loans are coming due, about 
who gets paid what. And I suspect these surcharges are going to 
come out of some private-sector pocket or Chinese pocket, not 
necessarily from the IMF.
    But, as I said in my opening remarks, I think the pandemic 
clearly is a very exceptional situation, and in many cases, I 
could understand suspending them.
    In the case of Ukraine and Argentina, these are countries 
that are--they are different, but Argentina has a profound 
willingness-to-repay problem. It would have been much better if 
the IMF did not give it a loan in 2018, probably better if it 
hadn't given a loan 17 years before that. This is a piece of 
that, but it is not the whole picture.
    Chairman Himes. Thank you, Dr. Rogoff.
    Ms. Segal, you were cut off earlier. Again, it has made an 
impression on me that even Dr. Rogoff's comments just now were 
hardly a ringing affirmative endorsement of surcharges. Do you 
have anything to add?
    Ms. Segal. I would just say, on the debt front, I would 
like for all of us to keep in mind that when the official 
sector steps up and provides debt relief but doesn't insist 
that the private sector and other creditors do as well, it 
actually doesn't help the country or address the problem. It 
leaves the lenders of last resort, kind of, holding the bag 
without fundamentally addressing the problem.
    And I think we saw that with the Debt Service Suspension 
Initiative (DSSI), which was an excellent initiative. It was 
quick. It had to be done in the face of crisis. But the 
official sector stepped up, provided debt relief, strongly 
suggested to the private sector that they do the same, and they 
didn't.
    So I really think we need to think in terms of, kind of, 
what is the additionality here? And if the official sector is 
providing relief, it should be because private creditors are as 
well and that the countries themselves are basically taking 
steps to go ahead and address the imbalances that led to the 
problem in the first place. That is kind of the tie-in to 
conditionality.
    Chairman Himes. Thank you, Ms. Segal.
    I am going to, in the interest of discipline, yield back 
the balance of my time. But I am also going to get with the 
ranking member and see if we can find, given what we have all 
heard today, some proposal that would at least make the 
situation around surcharges better.
    With that, I will yield back the balance of my time, and 
recognize the ranking member for 5 minutes.
    Mr. Barr. Thanks, Mr. Chairman.
    And I will jump into this discussion on surcharges and 
maybe try to mount a defense of some of the surcharges but 
invite other ideas and feedback on it.
    Obviously, the purpose of the surcharges is risk management 
and contributions to the Fund's precautionary balances. And I 
invite the witnesses to tell me why surcharges aren't part and 
parcel to conditionality and the need for conditionality to 
actually produce the catalytic effect we want.
    We want these loans to be repaid. We want to invite private 
capital investment. And if we simply transform the IMF into a 
global charity, as Mr. Davidson described, what incentive 
exists for private lenders to get into some of these distressed 
countries?
    I did find Professor Ghosh's argument to be interesting, 
something that I think we ought to consider, that maybe Chinese 
lending is more attractive when surcharges are in place. But 
what I would offer as a counterpoint, perhaps, is: Shouldn't 
the goal not be to just waive surcharges but, rather, to get 
more aggressive, have the IMF--or demand of the IMF to be more 
aggressive in calling out China's opaque lending practices and 
its non-adherence to international credit standards?
    That, in my judgement, is what threatens the Fund's work by 
saddling countries with unsustainable debt. If China's opaque 
lending standards in Belt and Road gets these countries into 
trouble, it will place greater pressure on the IMF.
    So, rather than waiving the surcharges, wouldn't it be 
better if the United States and other members of the governance 
of the IMF demand greater accountability of China and greater 
debt transparency as a means of holding China accountable and 
also helping these countries that are the victims of Chinese 
debt-trap diplomacy?
    And with that comment, I would invite feedback from 
Professor Ghosh or any of our witnesses.
    Ms. Ghosh. Thank you so much, and I would be very happy to 
respond to that.
    It is very difficult for the IMF to tell China who they can 
or cannot lend to or to tell countries whether or not to accept 
Chinese loans. So what it has to do, really, is to say, well, 
we are offering you loans that are more acceptable, et cetera.
    And it is not only corruption, because, let's face it, the 
IMF has also lent to so-called corrupt countries and 
governments, and China also lends to non-corrupt countries and 
governments.
    I think the Chinese lending pattern, yes, it is coming into 
problems of its own. The Belt and Road Initiative definitely is 
entering a morass. But it is of its own making.
    By imposing surcharges, you are not necessarily helping 
this at all. If anything, the fact that Pakistan has to pay all 
these surcharges to the IMF is causing Pakistan to approach the 
Chinese even more, saying, ``Please help me. I have such a 
shortage of foreign exchange, and now, in addition to 
everything else, I have to pay these surcharges.''
    I do believe that the surcharges are counterproductive even 
from that point of view, from the geopolitical point of view, 
because they are adding a burden which is unnecessary, 
unjustified, illogical, and does not prevent countries that 
have been in--Pakistan has been under the IMF's control for 
almost 4 decades now.
    Mr. Barr. Thank you for that, but can I reclaim my time?
    If we don't require anything, even of these distressed 
countries, in the way of conditions or economic reforms or 
paying a surcharge, why would private capital flow into these 
distressed countries?
    Ms. Ghosh. Pakistan has been following IMF conditionality 
for 40 years, and it doesn't have the growth conditions because 
the IMF's own review suggests that their own strategies are 
such that they are overly optimistic about the growth outcomes. 
They impose fiscal austerity, and then they are very surprised 
when that gives you declining growth.
    Mr. Barr. If any of the witnesses have a--
    Ms. Ghosh. It is the nature of the conditionalities. It is 
not conditionalities per se; it is the nature of the 
conditionalities.
    Mr. Barr. Do any of the witnesses have a different 
viewpoint?
    Mr. Rogoff. Another viewpoint would be that Pakistan has 
had--the military has been incredibly powerful and corrupted 
the system in many ways. And many studies suggest that is why 
they haven't been growing. To blame it on the IMF, I think, may 
be a very small issue here.
    Mr. Stiglitz. Can I add one--
    Mr. Barr. Just in the remaining time, for any witness: What 
can we do to improve debt transparency? What can we do to 
support making IMF lending conditional on a country's 
comprehensive disclosure of Chinese debt?
    Mr. Stiglitz. Can I make--
    Chairman Himes. I'm sorry. The gentleman's time has 
expired, and I do have to be disciplined. So I will, on behalf 
of the ranking member, invite each of our witnesses to respond 
for the record. I, for one, would be very interested in hearing 
the answers to those questions. But I do need to be disciplined 
about the time, so let's take that for the record.
    And I now recognize the gentleman from Guam, Mr. San 
Nicolas, for 5 minutes.
    Mr. San Nicolas. Thank you, Mr. Chairman.
    I wanted to use my time to kind of circle back on my 
initial line of questioning and the point that I was trying to 
make.
    I listened throughout the hearing about hundreds of 
billions of dollars in SDRs being out there. And then, I go 
back and I look at the data on the Republic of the Marshall 
Islands, the Republic of Palau, and the Federated States of 
Micronesia: The Marshall Islands accessed $7 million in SDRs; 
the same for the Federated States of Micronesia; and the 
Republic of Palau accessed $12 million in SDRs.
    Mr. Chairman, that is not even enough to pave a road in 
these island communities, much less build seawalls, much less 
harden water infrastructure, much less mitigate the impact on 
housing and the availability of housing in these particular 
areas that are becoming inundated with water as a result of the 
climate change that is materially happening and directly 
affecting these countries and presenting an existential risk.
    I would like to emphasize in my role here and in my time in 
this hearing the need for us to really press home the point 
that the stability of our global financial system is not unlike 
the stability of our domestic financial system. We can't just 
provide robust funding and robust opportunities for the biggest 
players while we ignore rural communities here in this country, 
and while we ignore those people who are trying to take 
advantage of what we are able to make available and are just 
not able to do so because they don't have the same means as 
some of the other bigger players.
    And that is the situation right now in our international 
financial situation. We have these island nations that are 
literally suffering directly as a result of these things, and 
they are not able to access the resources that we make 
available on a global scale.
    So, I really would like to encourage the IMF to take some 
kind of different approach and really factor in the real-time 
risk profiles that are being affected by climate change and 
provide the financial support to these areas that are already 
being dramatically impacted.
    We can try and address the big picture, and of course, that 
is always going to be important, but we have real-world 
consequences happening right now. And for us to have hundreds 
of billions in SDRs out there while these island communities 
are receiving $7 million in SDR support is really just a 
failure of the system with respect to the problem.
    And so, I want to just emphasize that. I will make time for 
any witnesses who may want to chime in, but, if not, Mr. 
Chairman, then I will yield back.
    Ms. Segal. Could--
    Mr. Sembene. I would add, Congressman, if you allow me, 
that I fully agree with you. I think there are a lot of things 
that can be done with those unused SDRs that are sitting in the 
account of the IMF.
    The main issue, in my mind, is we need to make sure that 
borrowing costs are reduced for those countries that are facing 
debt distress or that are under risk of high debt distress. If 
you don't do that, they won't have any other choice but to go 
to other alternative sources, be it China, be it the private 
sector, unfortunately. Because they have to make sure that they 
respond to the current pandemic properly. They also have to 
make sure that they provide basic services to their population. 
And they also have to make sure that there is social cohesion, 
while also doing the war on terror.
    So, we certainly need to use those SDR proceeds in what 
might be an innovative way to make sure that the funds get used 
not on borrowing costs of those countries. I think that would 
be the best service that we would give to those countries.
    Thank you.
    Mr. San Nicolas. Ms. Segal?
    Ms. Segal. I would just say, it sounds like the panel, and 
the committee, for that matter, is unanimous in wanting to 
channel more resources to deal with the issue of climate. I 
think where there is perhaps a difference is how those 
resources are channeled and through what institutions.
    And I would just add, if you look at the budget request for 
Fiscal Year 2022, it is in the nature of $100 million or so 
from the U.S. that is dedicated to the IMF and the redirecting 
of SDR resources, but more than 10 times that is dedicated to 
other facilities that are directed at climate issues.
    So, I don't think there is any argument about the need to 
channel more resources. It is just how and to which 
institutions.
    Mr. Stiglitz. Can I add one--
    Mr. San Nicolas. And just in closing--oh, go ahead, Mr. 
Stiglitz.
    Mr. Stiglitz. I think your comments highlight the 
importance of recycling the SDRs, that more countries need to 
do that recycling. And the institutional framework for doing 
the recycling has to be improved, as I mention in my report and 
Professor Ghosh mentioned in her written testimony, that the 
current framework is not up to the task. It needs to be a much 
better facility and much broader.
    I think in the short run, we face a real urgency because of 
the pandemic. In the long run, I think we ought to be thinking 
of the kinds of institutions that Professor Rogoff talked 
about, which is a new international institution, a green bank 
of some kind.
    But we know how long it takes to create those institutions, 
and in the meantime, we have to act. And that is why the SDR 
issuance and recycling of that is the intermediate solution 
until we get the kind of institution that Professor Rogoff 
talked about.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Texas, Mr. Sessions, is recognized for 5 
minutes.
    Mr. Sessions. Mr. Chairman, thank you very much.
    At this time, I do not seek time, except I want to 
reinforce my thanks to this witness panel and to the wisdom of 
having this hearing.
    I yield back my time.
    Chairman Himes. The gentleman from Arkansas, Mr. Hill, is 
recognized for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman.
    And, again, I want to add to the compliments for the panel, 
their detailed answers, and for your engagement, and Mr. Barr 
as well.
    I do want to turn back to the role of who is in the right 
position to handle things like long-term structural adaptation 
for something as serious and long-range as climate. And I just 
don't think it is a short-term-lending, foreign-exchange-based 
financial intermediary like the IMF.
    I continue to state that we shouldn't convert the IMF into 
either an aid organization or into a global development 
organization. It is an intermediate-term institution to aid 
companies with foreign exchange and short-term debt management 
challenges.
    And I do agree with a couple of points. One was on the 
surveillance work of the IMF. Clearly, long-term projections on 
surveillance as it relates to a country's intermediate- and 
medium-term financial risks associated with coping with 
climate--that is certainly a worthy use of the macroeconomic 
resources and analysis resources of the IMF.
    But if climate is our real focus, then why do we treat 
China like a developing nation at the World Bank? Why do we 
keep funding no-strings-attached SDR issuances to giant carbon 
emitters like India or China or many, many other countries? 
That just doesn't make any sense. And that shows you the blunt 
incoherence of an across-the-board SDR issuance.
    And since it is based on shareholdings--my friend from 
Guam, Mr. San Nicolas, makes many good points on Palau, and the 
people of The Marshall Islands, and I concur with him. And it 
says to me that that is, again, a long-term development risk 
strategy, not a short-term financing risk, considering their 
association and their financial position. So, again, it is more 
of a development challenge. That is the World Bank; that is the 
regional banks.
    If we are concerned about climate, why aren't we pursuing 
former Congressman Ed Royce's strategy of building smaller 
nuclear reactors for Africa with a 150-year life, low-waste 
reprocessing that generates power and gets people off of fossil 
fuel?
    I don't mean to be rhetorical, but I think that is how we 
should be looking at this, and not burdening these sorts of 
structural issues with an entity not created to cope with them.
    I want to turn next to the issue of management at the IMF. 
I have to say I was so pleased that Chairwoman Waters was very 
aggressive last September in talking about her concerns and 
describing them as, ``very troubling,'' where the current CEO 
of the IMF, the former CEO of the World Bank, essentially 
changed an economic forecast at China's request. I found that 
troubling. I think the IMF board should have dismissed the 
managing director over that. I think it was a bad move.
    And that mismanagement of the Fund continues as recently as 
in December, when the first deputy managing director, Geoff 
Okamoto, was replaced by an academic whom I don't believe has 
the Treasury resume or the operational experience to be in the 
chief U.S. position at the IMF, the first deputy managing 
director.
    Also, Mr. Chairman, I have concerns about the management 
and operations of the IMF. I hope you and Chairwoman Waters 
will consider that as a possible oversight topic as this year 
goes on in the Congress.
    Turning to an additional key point I wanted to make--and I 
am so grateful for the second round, sir--under the IMF's 
rules, a member country of the Fund does not have to be a U.N. 
member. For example, Kosovo is not a U.N. member state, but has 
been an IMF member since 2009. Taiwan is not a U.N. member 
state, but it belongs to the WTO and the Asian Development 
Bank. And Taiwan, of course, is immensely larger than Kosovo.
    The Biden Administration has called for Taiwan's meaningful 
participation in all international organizations. And I ask 
Professor Rogoff or others on the panel, shouldn't we support 
Taiwan's membership at the IMF, just as the U.S. did with 
Kosovo?
    Mr. Rogoff. I will take that question briefly first.
    Good luck trying to do that. I think if we did, that we 
might be precipitating China to withdraw. And are we actually 
prepared to do that?
    Mr. Hill. Thank you, Mr. Chairman. I yield back the balance 
of my time.
    Chairman Himes. The gentleman yields back.
    The gentleman from Illinois, Mr. Garcia, is recognized for 
5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman. I will be 
brief, with just one question that I meant to ask Dr. Sembene.
    The IMF told the U.N. High Commission on Human Rights that, 
as a purely economic agency, it does not, ``directly engage in 
the promotion of human rights.'' But we have seen the IMF work 
for political reasons on many occasions, including the 
disastrous 2018 loan to the Macri government in Argentina.
    Mr. Sembene, do you agree that the IMF has played a 
political role in the past? And should it incorporate human 
rights into its work?
    Chairman Himes. Mr. Sembene, I don't know if you heard the 
question. That was directed, I think, at you by Mr. Garcia.
    Mr. Stiglitz. Whom was it addressed to?
    Chairman Himes. Mr. Garcia, do you want to repeat that? I 
will give you the time back.
    Mr. Garcia of Illinois. Yes. Thank you.
    The IMF told the U.N. High Commission on Human Rights that, 
as a purely economic agency, it does not, ``directly engage in 
the promotion of human rights.'' But we have seen the IMF work 
for political reasons on many occasions, including the 
disastrous 2018 loan to the Macri government of Argentina.
    My question to you is, do you agree that the IMF has played 
a political role in the past? And should it incorporate human 
rights into its work?
    Mr. Stiglitz. Let me take that.
    First, the boundary between economics and politics is 
always going to be vague, and we try to separate them. When I 
was at the World Bank, discussing corruption was viewed to be 
political. And one of the things that President Wilkinson did 
at the World Bank was to say, no, corruption is an economic 
issue, it is not a political issue. And so, there was a change 
in the boundary to say that corruption has economic 
consequences.
    My own view of the Macri loan, the 2018 loan, was that it 
violated many of the standard rules of the IMF. It was 
obviously a particularly foolish loan, because they did not put 
on it a condition that would stop the money going into the 
country and going out to finance private-sector outflow from 
Argentina. The result of that very poorly-designed loan, which 
was, many people think, intended to help the Macri government, 
was that the country wound up $44 billion more in debt, with 
nothing to show for it.
    That was an example--in my earlier testimony, I pointed out 
that the issue was not conditionality, but which condition. The 
condition they should have imposed is that you cannot use that 
money to finance capital outflow. And, unfortunately, they 
didn't put that condition on it.
    Mr. Rogoff. I just want to second that it is certainly very 
awkward, the 2018 loan. And I don't know what they were 
thinking exactly. The Fund was flush at the time, and had a 
long relationship with Argentina and they were trying to patch 
it, but it was a huge mistake.
    But I will also say, if you are going to put conditions on 
capital outflows, that has happened a lot with money made 
during the pandemic, with money, and SDRs that went to 
Argentina, and Lebanon, a lot went into capital flight.
    It is tricky to put those conditions on, but they just 
shouldn't have made the loan, not without a big write-down in 
the private debt.
    Mr. Garcia of Illinois. Thank you.
    And, Mr. Sembene, it looks like you may be back. Did you 
hear the question?
    Well, maybe we didn't get you back.
    Without further ado, Mr. Chairman, I yield back.
    Chairman Himes. The gentleman yields back.
    The gentleman from Ohio, Mr. Davidson, is recognized for 5 
minutes.
    Mr. Davidson. Thank you, Mr. Chairman.
    And, Mr. Rogoff, I would like to pick up where I left off. 
In your testimony, you stated that a number of larger emerging 
markets have become more resilient due to the fact that they 
have large reserves of foreign currency that provide them a 
cushion from the need for the IMF.
    And this makes me consider our own domestic policy and how 
our overspending affects inflation. We are the world's reserve 
currency. We are a substantial backer, the largest, of the IMF. 
And, of course, we are no longer constrained even by the amount 
of revenue that we can collect. We are no longer constrained 
even by the amount of money someone will lend us. We are 
monetizing--we are debasing our currency, frankly, to state it 
more plainly. And as was highlighted by, I think, Professor 
Ghosh's own testimony, about $25 trillion around IMF members.
    So, if we are growing this inflation through our own 
domestic policy and, frankly, through a lot of the leaders of 
the IMF doing similar things, does this undermine those foreign 
currency reserves held by those emerging-market countries?
    Mr. Rogoff. The very last question you asked, yes, to the 
extent that they are longer-term loans--they are holding 
longer-term loans. To the extent it is short-term, they are 
choosing to let it be undermined by accepting these really low 
rates.
    The inflation is a threat because if the Federal Reserve 
decides they need to raise interest rates more--and my guess is 
they may need to make the interest rate higher than the 
inflation rate at some point--there really could be a lot of 
blood in emerging markets. It is a huge concern.
    The markets clearly don't think that at the moment, but 
there is a lot of vulnerability. I think that is a big issue. 
We are talking about these poorer countries where the sums are 
not so large, and they really could be solved with aid. They 
are just not that big. But when you get to the larger emerging 
markets, getting agreement with China, for example, on what to 
do and places where loans are much bigger, that is going to be 
very hard. It already has been.
    Mr. Davidson. Yes. Thanks. I think you did a nice breakdown 
of the consequences for inflation, and I would just put it in 
contrast to some of the other things.
    The time horizon for our problem with our debt is very 
short. We have trust funds for Social Security and Medicare 
that are on a path to bankruptcy, which really highlights the 
solvency problems that countries with an inverted debt-to-GDP 
ratio, like America, really should pay a lot of attention to, 
near-term attention. And as we feel the need to become generous 
and give to this global charity that is envisioned by some 
folks, we ought to make sure we take care of business in our 
own countries--
    Ms. Ghosh. Could I just add--
    Mr. Davidson. --so that we don't default on our own debt.
    Thank you, and I yield back.
    Ms. Ghosh. Could I just add something?
    Mr. Davidson. I have already yielded back, but I will leave 
it up to the chairman.
    Chairman Himes. Yes, very quickly, Professor Ghosh.
    Ms. Ghosh. Yes, just because the $25 trillion was raised. 
The $25 trillion of quantitative easing that I mentioned was 
before the pandemic and before the recent Biden Administration 
money. And we had that over a period since 2008 without any 
inflation or any consequences globally, and particularly in the 
advanced economies.
    We had a period of 14 years of dramatic quantitative easing 
without inflationary consequences. I'm just putting it on the 
record.
    Chairman Himes. Okay. I think the gentleman has yielded 
back.
    So, I am going to say a big thank you to all of our 
witnesses. Really, my ambition for these hearings, which is 
rarely met, is that we have a good give-and-take of ideas, that 
we have dialogue, that we have an exchange of constructive 
disagreement, and we really achieved that today. So, I really 
want to thank all of our witnesses for participating.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    With that, and with my gratitude to our witnesses, this 
hearing is adjourned.
    [Whereupon, at 2:16 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           February 17, 2022
                           
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