Janet Yellen’s New Financial Multilateralism
In a recent letter to her G20 colleagues, US Treasury Secretary Janet Yellen called for stronger multilateralism in responding to the COVID-19 crisis. By emphasizing governance, flexibility, and accessibility, Yellen offers reason to hope for broader action to address the many gaping holes in the current global financial system.
LONDON – The International Monetary Fund and the World Bank have sprung into action in ways that would have been inconceivable even a year ago. Under former President Donald Trump, the United States – the main shareholder, with veto rights, in both institutions – did little (beyond causing occasional disruption) to shape their policies. Now, the US is taking the lead in coordinating their role and helping poor countries to respond to the COVID-19 crisis.
Spearheading this approach is US Treasury Secretary Janet Yellen. In a letter to her G20 colleagues last month, Yellen wrote that no single country can “declare victory” over the “dual health and economic crises” caused by the pandemic. “This,” she added, “is a moment made for action and for multilateralism.”
Yellen’s letter may not mark the beginning of a new “Bretton Woods moment,” as IMF Managing Director Kristalina Georgieva advocates. But it does mark a welcome departure from Trump’s recklessness and negligence. And it does seek real action that the Trump administration had opposed: the strengthening of the IMF and World Bank toolkits, including the Fund’s concessional facilities, and a new allocation of its reserve asset, special drawing rights (SDRs), to increase liquidity for low-income countries.