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WASHINGTON – The Financial Services Monetary Policy and Trade Subcommittee held a hearing today with Dr. Nathan Sheets, Under Secretary for International Affairs at the U.S. Department of the Treasury, to examine ways the U.S. can make development banks more accountable.
“Congress plays a very important role in determining U.S. funding for the Multilateral Development Banks (MBDs) and engaging in oversight of the Administration’s participation in the MDBs. Although the Treasury Department represents the U.S. at the MDBs and negotiates the amounts committed to the MDBs for general capital increases and the replenishment of concessional loan windows, only Congress has the constitutional authority to authorize and appropriate the funds required to fulfill these commitments,” said Subcommittee Chairman Bill Huizenga (R-MI). “Currently, the Obama Administration is undertaking negotiations for a three-year replenishment of the World Bank’s and African Development Bank’s concessional loan windows and is also in discussions to alter how other institutions, including the Inter-American Development Bank, finance future initiatives. Additionally, the Administration has proposed a doubling of the North American Development Bank’s capital, the first such increase in history. Today’s hearing is critical to examine the Obama Administration’s plans regarding these matters, many of which are contingent on congressional authorization, as well as addressing whether development banks are improving outcomes for low-income beneficiaries in a cost-effective manner.”
Key Takeaways from the Hearing:
- The Obama Administration should reject mission creep for the Multilateral Development Banks (MDBs) by focusing on the world’s poorest, not by subsidizing middle-income countries that can borrow from the private sector.
- The MDBs, particularly the World Bank, should eliminate perverse incentives that prioritize lending over improving development outcomes.
- The MDBs should consider the rights of the poor before lending to regimes that oppose economic freedom and basic human liberties.
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