WASHINGTON – U.S. Treasury Secretary Steven Mnuchin said Wednesday that despite plans to cut contributions to the World Bank and other multilateral institutions, the administration still plans to preserve Washington's power within them as a critical tool for U.S. foreign policy.
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"America will continue to lead on issues of global importance, and therefore will remain a top donor to the multilateral development banks as our economy is the largest in the world," Mr. Mnuchin said in prepared remarks to a House Appropriations subcommittee.
His testimony was a clear indication that the administration of President Donald Trump doesn't plan to give up its veto power at the two top global lending institutions, nor abdicate its heavyweight role in them.
However, he said, the Trump administration is using its budget proposal to put multilateral institutions such as the World Bank and the International Monetary Fund on notice.
"Treasury's international budget request should send a message that the international financial institutions need to operate more efficiently," he told the subcommittee that oversees spending on international programs. "Just as our federal government is streamlining, so too must these entities."
That may mean cuts beyond the proposed 15% reduction in promised funding for a key World Bank lending unit. "We will preserve investments where they make sense, but we must balance priorities in order to fund other parts of the government," he added.
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Rep. Nita Lowey of New York, the subcommittee's top Democrat, said that if the administration is focused on efficient spending of taxpayer dollars overseas, "drastic cuts to institutions that maximize our resources, aide in the sustainability of development programs and create new markets just don't make sense."
Subcommittee chairman Hal Rogers (R., Ky.) also signaled a wariness about the proposed cuts, saying a desire for fiscal constraint had to be balanced against maintaining U.S. global leadership. "These institutions provide opportunities for the U.S. to extend its influence around the globe in the effort to reduce poverty and foster economic stability," he said.
The White House proposed giving the World Bank's International Development Association, or IDA, $1.097 billion a year over the next three years. That is down from the $1.29 billion annual contributions the Obama administration previously committed to the bank's lending arm and 8% below the last financing round for IDA. The proposed cut represents the majority of the $650 million in funding for multilateral development banks the Trump administration said it plans to cut from past White House commitments.
The administration didn't outline any commitments to the World Bank's other major lending unit, the International Bank for Reconstruction and Development, which finances middle-income countries. But that is because the bank hasn't yet asked for new financing. Bank watchers say chances are slim the new administration will back new cash resources for IBRD, however.
And while there are no current requests from the IMF for fresh loans from the U.S. to beef up its emergency-lending resources, some fund watchers say it could face a cash crunch if several large emerging markets run into trouble in the near future.
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(END) Dow Jones Newswires
June 14, 2017 16:31 ET (20:31 GMT)