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U.S. DEPARTMENT OF THE TREASURY
Remarks at the Center for Global Development on the IMF and
Support for Developing Countries by Under Secretary for
International Affairs Jay Shambaugh
September 7, 2023

As Prepared for Delivery
Thank you, Nancy, for the introduction. And thank you to the Center for Global Development for
hosting me.
Our meeting comes at an important moment for the international financial architecture. One year
ago, Secretary Yellen stood right here, at the CGD, and shared her ideas on development finance.
She issued an urgent call for the evolution of the multilateral development bank system – for bold
action to meet the challenges of the 21st century. The United States led this call, and we are now
part of a broad coalition – with fellow shareholders and with MDB management and staff – so that
the evolution agenda delivers in tangible ways for emerging markets and developing countries.
Today, I want to focus on the IMF to complete the picture of how the Treasury Department sees
international financial institutions delivering for emerging markets and developing countries. I
want to share my vision for the IMF and discuss how it can be strengthened to meet the challenges
facing the global economy.

THE ROLE OF THE INTERNATIONAL MONETARY FUND
Since its founding, the United States has strongly supported the IMF both for the good of the world
and because we have recognized that we benefit from greater growth and economic stability in the
rest of the world. Stronger economies abroad and sound policy advice from a high standards
international organization help raise living standards around the world and are very much in the
U.S. national interest.
Established in 1944, in the wake of the Great Depression and second world war, the IMF was
charged with overseeing the international monetary system – to help maintain exchange rate
stability and support global growth.
Decades later, the fixed exchange rate system under Bretton Woods gave way to new exchange rate
arrangements, and the IMF adapted its role and its policy advice to fulfill its mandate of overseeing

the stability of the international monetary system. It helps monitor exchange rate developments,
guides countries through challenging macroeconomic issues, and works to facilitate financial
stability and economic growth.
The IMF has been an invaluable – and indispensable – partner.
Time and time again, the IMF has adapted to the needs of the moment, without shying away from
undertaking institutional reforms to make it fit for purpose. It is as essential today as it was at its
founding. Even if it did not exist, we would need something like it nonetheless.
This is why we are making a commitment to reinvest in the IMF. This year, we will support an
increase in quotas – for a broad increase across all members – with the goal of strengthening the
IMF as a shareholder institution at the core of the global financial safety net.
We are pressing forward to meet the financing needs of the Poverty Reduction and Growth Trust,
so that the IMF can continue to lend to low-income countries now and in the future.
We want to work with IMF shareholders and management on ways to elevate the voices of
emerging markets and developing countries.
We want to make sure the IMF delivers on its core mandate of surveillance, capacity development,
and lending, and demonstrates a strong track record of guiding countries back onto sustainable
macroeconomic trajectories.
We also need the IMF to play its role in an unflinching and rigorous way so that countries make
needed adjustments to bring their economies to a sound footing. No other institution can provide
macroeconomic guidance along with funding to steer countries to better macroeconomic
outcomes.

MACROECONOMIC CHALLENGES AND PRIORITIES
Let me set the current context. Our discussion comes on the back of two massive global shocks—
the loss of life and economic disruption from the COVID-19 pandemic; and the destruction,
elevated energy and food prices, and other spillovers from Russia’s illegal and immoral war against
Ukraine.
For emerging markets and developing countries, the impact of these shocks has been especially
severe. First came the immense fiscal needs to support individuals and families during the
pandemic. Then Russia’s war against Ukraine led to a spike in commodity prices, putting further
pressure on public finances and creating food insecurity for many. Heightened debt vulnerabilities
and tighter financial market conditions limited access to international capital markets.

The IMF responded quickly and forcefully to these shocks. It tailored its lending toolkit to provide
emergency financing at an unprecedented scale to countries facing acute economic downturns. It
stood up new facilities to meet growing balance of payments pressures from the food crisis and
mounting transboundary challenges, such as climate change. And it has played a key role in
implementing G20-led initiatives on debt service suspension and debt relief, including by cochairing the Global Sovereign Debt Roundtable to address key bottlenecks in the debt
restructuring process.
The IMF is full of incredibly talented people who can contribute positively to a wide range of
challenges facing the global economy, but we cannot let the temptation to address every problem
pull the IMF away from its core mission of macroeconomic and exchange rate surveillance and
guidance. That mission is too essential to stray from.
Often, the IMF can best contribute to new challenges through its core mission. Take climate as an
example. Through strong macro guidance, the IMF can help countries undertake fiscal reforms to
reduce distortionary energy subsidies that also have bad climate outcomes. It can help countries
strengthen their macroeconomic frameworks so that they can return to market access and better
mobilize private capital to invest in climate resilient infrastructure. Through capacity
development, it can help countries better raise revenue, which is crucial for macro stability, but
also an essential part of funding both climate mitigation and adaptation. When climate risks
present a balance of payments strain, the IMF can provide lending (for example, via the Resilience
and Sustainability Trust). At the same time, the IMF should not be experts on climate issues.
Instead, it should focus on macro-critical issues and rely on the World Bank and others for sectoral
expertise. In short, solving major world challenges should involve reinforcing the core mandate,
not straying from it.

IMF PRIORITIES
In this context, I would like to lay out three priorities for the IMF.
First, the IMF must provide sound, even-handed policy advice to all members in its core areas of
expertise, particularly fiscal, monetary, and financial sector issues.
Surveillance is one of the IMF’s core tools to provide this policy advice. The IMF regularly monitors
the economic and financial developments and policies of its members – bilaterally and globally.
This work is crucial for revealing systemic risks and vulnerabilities, both within member countries
and with respect to the global economy, before they turn into crises.

And it helps countries identify the right policy mix to achieve their economic objectives. Debt
overhang remains one of the most significant economic headwinds. And many low-income
countries are confronting difficult policy tradeoffs to strengthen their fiscal positions to support
debt sustainability, while still achieving progress on sustainable development goals and
addressing the economic challenges posed by climate change. The IMF offers invaluable advice,
including through its rigorous debt sustainability analysis framework.
The IMF must be candid in this effort. It must be willing to have difficult conversations with
member countries, especially when there are downside risks, or policies that could have adverse
spillovers to the global economy. It must be willing to provide unwelcome advice. This includes
calling out harmful external sector policies and exchange rate regimes that distort the domestic
economy and push the cost of adjustment onto trading partners. From its founding, the IMF has
been charged with monitoring exchange rates and considering how policies in one country may
have spillovers to the globe. The IMF must be clear when countries violate these norms. The
widespread belief that a major shareholder intervenes in opaque ways flies in the face of what the
IMF is supposed to be. The IMF must urge members to adopt best practices such as transparency
on foreign exchange intervention.
IMF advice should address balance sheet vulnerabilities that could pose systemic financial stability
risks. This should also mean advocating for difficult policy corrections that pay dividends over
time, including pressing countries to address governance or corruption issues that squander
resources and limit growth.
We all have a stake in making sure that surveillance remains front and center at the IMF’s mission
and that it offers effective policy advice for its entire membership – for both big and small
economies.
The IMF’s new Strategy for Fragile and Conflict-Affected States is one example where the institution
has stepped up to meet members’ needs. The strategy builds on the IMF’s longstanding experience
with fragile and conflict-affected states to provide more robust, more tailored approaches to reflect
the country-specific fragility context.
The IMF’s work on AML/CFT – or anti-money laundering and countering the financing of terrorism –
is another example of where the IMF provides policy advice on macro-critical issues. Effective
implementation of AML/CFT regimes is essential to the integrity and stability of the international
financial system, global growth, and rule of law.
IMF surveillance is critical not only for individual members but for the global system. For
surveillance to be most effective it should also be transparent, and here, the IMF has made

significant strides over the past few decades. The IMF publishes detailed information on country
data, financial membership, and Executive Board decisions. We welcome the IMF’s ongoing efforts
to boost transparency, and urge the IMF to press for greater transparency on exchange rates,
borrowing and lending, and financial system data.
Second, the IMF must continue to advance its work in capacity development. Robust capacity
development, paired where needed with programs, can help countries establish sustainable
medium-term macroeconomic frameworks. IMF surveillance and lending relies on an
understanding of a country’s economy which depends, at its core, on data quality and availability.
The IMF needs to uphold its rigorous data standards for surveillance, supported by valuable
technical assistance to members to improve data gathering, quality, and transparency.
Capacity development has helped countries to strengthen their economic institutions and
facilitate stronger macroeconomic policymaking. This includes the IMF’s critical work in helping
countries to bolster public finances, modernize their monetary and exchange rate regimes, and
strengthen governance and anticorruption efforts. Over the years, the IMF has expanded access to
advice, peer-to-peer learning, and trainings with country authorities which we value and welcome.
The IMF’s assistance is increasingly needed, for example in the remote reaches of the Pacific
Islands in areas such as public financial management, taking into account the impact of climate
change, and financial supervision and regulation as the loss of correspondent bank relationships
threaten connectivity to the international financial system.
Third, the IMF must create and sustain high-quality lending programs.
The IMF’s most public-facing role is that of crisis response. When countries experience balance of
payments crises, the IMF provides financing at reasonable rates to smooth over immediate
liquidity needs. It provides financial space for member countries to implement reform programs,
helping them avoid choices that could exacerbate financial stresses and inequality. And an
appropriately designed IMF program, with strong policy credibility, can help catalyze financial
flows over time from other parties, particularly the private sector.
In response to the pandemic and Russia’s war against Ukraine, the IMF rapidly scaled up
emergency financing to help countries in a time of crisis – to weather these acute exogenous
shocks. This lending helps not just the individual members, but the global economy as well.
As countries look toward recovery, we are encouraged that more countries are transitioning away
from emergency financing assistance, and instead are seeking high-quality programs. These
programs must be accompanied by policy reforms that restore economic stability with an eye
toward sustainable growth.

The IMF must embrace its role and help countries correct underlying macroeconomic imbalances.
It must promote policies that support fiscal and debt sustainability, address exchange rate
misalignment, and strengthen structural reforms to catalyze sustainable and inclusive growth.
The IMF must work closely with a country’s fiscal and monetary authorities to identify the
macroeconomic reforms needed to achieve economic objectives. And once they do, the IMF
should remain steadfast in its advice.
But to be effective, the IMF must be willing to walk away if a country will not take needed steps. It
is essential that programs not just provide funding. The funding must serve a purpose and come
with policies that return a country to stability. A program with insufficient adjustment will just
leave the country back in the same or worse economic position, often with more debt. And, if a
program lacks credibility, it cannot bring new private financing along with it.
We rely on the IMF to help countries emerge from a crisis better than where they were before.
To this end, traditional programs that help countries resolve immediate balance of payments
problems should be temporary in nature. IMF programs are structured to provide temporary
financing in response to acute crises, and the revolving nature of IMF financing is intrinsic to the
IMF’s mandate. We want to see an IMF where countries can seek assistance from the IMF and then
emerge from programs on more stable economic footing. We know, though, that some countries,
in particular open emerging markets, can face external shocks that may overwhelm even robust
macroeconomic buffers. For countries that meet the highest standards for economic policy and
governance, the IMF’s Flexible Credit Line can offer additional reserve coverage to bolster the
strength of independent central banks.
Credibility is also at stake. We expect the IMF to play a catalytic role in helping a country regain
market access. This requires the IMF to quickly step into crisis situations, with substantial
financing backed by macroeconomic adjustment and robust reforms.
We must do what we can to bolster the IMF’s track record, and that might mean making difficult
decisions with members.
We understand that in some cases, a country will require a follow-on program to resolve its balance
of payments problems. But repeated programs that merely roll over IMF debt without policy
reforms that restore sustainability and improve the lives of a country’s citizens only worsen the
debt situation of a country, waste finite shareholder resources, and harm the credibility of the IMF.
In these moments, the IMF must be willing to hold firm on the policy adjustments that are
necessary. We recognize that this is not an easy thing to expect of an institution that exists to help
its members meet temporary shocks as well as more protracted constraints on growth. And we

cannot be cavalier about the difficulties of advising national authorities in an apolitical manner on
policy choices that are intrinsically political. But it cannot be the policy of the IMF to roll over
programs, or approve reviews, only to avoid arrears without sound policy reforms in place.

NEXT STEPS
We ask so much of the IMF because there is simply no other institution that can fill its role in the
global financial system.
For the IMF to play its role well – across all areas of surveillance, capacity development, and
lending – it needs to be responsive to the needs of its membership. It must strive to be a reliable
partner that countries can turn to in times of crisis. This will mean implementing policy reforms
where needed and seeking opportunities to better reflect the voices of its membership.
I’d like to conclude by laying out how the U.S. Treasury believes we should strengthen the IMF.
First, we must make sure that the IMF has the resources it needs to lend.
We see a pressing need to bolster the finances of the IMF’s flagship trusts that tackle poverty and
build resilience, and we will continue to work with our Congress to do so.
The Poverty Reduction and Growth Trust – or the PRGT – is the IMF’s concessional financing facility
for eligible low-income countries. For the poorest PRGT-eligible members, the interest rate is
currently zero percent.
The IMF’s new Resilience and Sustainability Trust – or RST – is intended to address balance of
payments risks from longer-term macro-critical challenges such as climate change and pandemics
and helps countries build resilience when paired with traditional IMF programs underpinned by
strong policies. Ten countries have already benefitted from the RST, and demand is strong.
The United States contributed $70 million to the PRGT’s subsidy reserve account last year. And the
Biden Administration continues to call on Congress to authorize the United States to lend $21
billion to the IMF for the PRGT and the RST.
But in light of higher lending in the wake of the pandemic and Russia’s war against Ukraine, PRGT
resources are falling short, particularly subsidy resources needed to sustain the PRGT’s interestfree lending. IMF management are urgently calling for additional pledges of $1.2 billion for subsidy
resources. Although donor resources can help to meet the immediate need, putting the subsidy
account on a sustainable footing will require further action.
This is why Secretary Yellen and I have called on the IMF to table options by the time of the Annual
Meetings next month to close the longer-term financing gap so that the IMF can continue to

provide concessional lending now and into the future.
One idea the IMF should consider is using its internally generated resources to support the PRGT
subsidy account. This is a way for the entire membership of the IMF to show its strong support for
its most vulnerable members. In the near term, the IMF could fill a majority of the PRGT subsidy
gap though a distribution and transfer of internal resources from the IMF’s reserves, while still
maintaining a very strong buffer of precautionary resources due to the recent uptick in lending.
Second, we strongly support making the IMF a more quota-based institution through an
equiproportional increase in quotas – an increase that is allocated to all members in proportion to
their existing shares, combined with a corresponding decline in the IMF’s borrowed resources.
Quotas are core to the IMF – they determine members’ voting power and access to IMF financing.
An equiproportional quota increase that restores the IMF as a quota-based institution will reduce
its reliance on borrowed resources and provide the IMF with a more consistent and predictable
level of resources. It would safeguard the IMF’s role as the center of the global financial safety net.
And it could raise borrowing access for low-income countries, allowing for larger IMF programs
when needed and consistent with their debt sustainability. It would also remove the need for the
IMF to set up ad hoc bilateral borrowing arrangements that are an opaque and less reliable source
of financing.
The United States will continue to advocate for changes to the quota formula to make it more
reflective of the global economy, including by giving more weight to dynamic emerging market
economies. An important part of that process will be that all countries – especially those that
would see an increase in share – are respecting the roles and norms of the IMF and working to
strengthen the international monetary system. We look forward to working with other countries
on a new quota formula that ensures that all voices are heard in the process. Changing shares
without an agreed framework would result in upweighting a handful of countries at the expense of
many others in an ad hoc manner.
Third, we must work together to make sure the IMF represents its diverse membership.
As emerging markets and developing countries have become an increasingly significant part of the
global economy, they have called for increasing their representation at the IMF. Absent a durable
change in quota shares, we think more could be done to elevate the voices of these countries.
In particular, it is my view that senior IMF management should be more representative of the
membership they serve.

One way to do this could be to add a fifth Deputy Managing Director position. For over a decade,
the IMF senior leadership has had four Deputy Managing Directors, a first deputy position
traditionally held by the United States, a deputy position traditionally held by Japan, a deputy
position traditionally held by China, and one deputy for all emerging markets and developing
countries. Adding a new slot would help to broaden the perspectives of the IMF’s senior leadership
team. If designed well, it could mean that at all times, both emerging markets and low-income
countries would have a voice at the most senior level.
Stronger representation could also mean strengthening the voice of emerging markets and
developing countries at the IMF Executive Board. To that end, we are open to engaging with subSaharan African members on whether they would find value in the creation of a 25th chair at the
Board to provide a third chair for the region.
For other policies, our priority is simply to listen, whatever the issue. An example here is surcharge
policy. We are open to hearing views on surcharge policy reform that balance the need to address
members’ concerns, and the objective of adequately protecting the IMF’s balance sheet and
incentivizing the short-term nature of IMF finance.

CONCLUSION
The IMF has been an important anchor for the global financial system. And we need to make sure
that it can continue to play that role. Shocks will hit countries – especially the most vulnerable –
and the IMF must stand ready to support countries in their immediate response and help countries
build resilience to future shocks.
The world needs the IMF to be a trusted voice. One that comes through with policy advice and
resources, but also one that provides the tough advice needed to steer policy back to sound
footing.
Though I conclude my opening remarks here, I view this as the start of many policy discussions. I
invite the international community, particularly emerging markets and developing countries and
IMF management and staff, to partner with the United States to drive these reforms forward. Over
the last year, the United States has worked closely with a range of country partners and with World
Bank management to push the MDB evolution agenda forward. This is already delivering tangible
results in how the Bank operates and the resources it can use to better support emerging markets
and developing countries. Now is time to show how the United States supports emerging markets
and developing countries at the IMF as well.
There is a lot more work to do and I look forward to tackling those challenges together.

Thank you.
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