The IMF is ‘too general an allocation’ to support poorest countries coping with COVID-19: Rep. Hill

Rep. French Hill, joins Yahoo Finance’s Alexis Christoforous and Kristin Myers to discuss Special Drawing Rights (SDRs) strategy for the International Monetary Fund (IMF) and Biden’s stimulus packages.

Video Transcript

KRISTIN MYERS: Welcome back. I want to bring on Arkansas Congressman French Hill now. He's been critical of Treasury Secretary Yellen's support of special drawing rights at the IMF as pandemic relief for some countries. Now just a brief explainer for everyone at home. SDRs, as they're known, are an artificial currency. They're used by countries to supplement their reserves.

So Congressman, thanks so much for joining us again to chat about this. Now, you met with Secretary Yellen just yesterday about the SDRs. What can you tell us about that conversation?

FRENCH HILL: Well, I suggested to the secretary that the better strategy would have been to use a special allocation, where the IMF could have targeted special drawing rights, additional reserves for the countries the hardest hit by the pandemic.

But that's not what the IMF is doing. Instead, they're doing this general allocation, which means most of the money goes to rich countries that don't need additional reserves or potentially to rogue regimes that we have trouble with in the United States, such as Syria, Russia, Iran. Even China would get $40 billion, and that's money that China doesn't need. So those are our concerns that it's too general an allocation, and we have other ways that we can help the poorest countries in the world cope with the pandemic and get back to economic growth and get vaccinated.

ALEXIS CHRISTOFOROUS: Congressman, what might those other ways be? How can we support those other countries, because we keep talking about how important it is that globally we get our arms around this pandemic in order to really and truly eradicate it?

FRENCH HILL: You bet. Well, first, the World Bank under David Malpass's leadership has extended about $160 billion of credit to the poorest countries, with a particular emphasis on vaccine distribution where that's needed most. The IMF itself has helped over 80 countries get access to foreign exchange lines of credit and have been very helpful.

And then the area where the IMF works best, I think, is in their poverty trust fund that they have that the developed countries contribute SDRs to. And it also has been very active in the most troubled countries. And this is on top of bilateral aid and aid from non-governmental organizations that target help for the pandemic relief in these very poor countries.

KRISTIN MYERS: Now Congressman, I hear what you're saying, but the IMF has repeatedly stated that they A, need more resources to act in times of crisis, and then they also have been struggling to deploy those resources. I mean, throughout the pandemic, at least the last time we spoke, only 10% of its capacity was deployed throughout the pandemic, which, of course, doesn't do much good to some of those struggling countries throughout this pandemic. So then what do you make of that point, considering that you say that the IMF already has enough of these resources, but the IMF says they don't, and they're not being used effectively?

FRENCH HILL: Well, that tells me that they have trouble getting the money out, but they are helping over 80 countries. They do have sufficient resources to do that. We have a targeted better way to get reserve assets to poor countries. And the IMF and the World Bank together have been very supportive of these poorest nations.

Also, when it comes to dollar relief, you know, the New York Federal Reserve bank had $1 swap lines with many of these countries, and a lot of those have now been paid down, which means that, obviously, there is adequate supply of dollars out around the world as these economies reopen. But let me say we all support helping the hardest-hit poorest countries through the pandemic. We just simply argue that a $650 billion general allocation of SDRs isn't the most targeted way to do that.

And I think Secretary Yellen would agree with that. She recognizes the downside of this approach. And I'm just glad we got the number from $3 trillion down to $650 billion. But the way the Biden administration's going about it is they're skirting congressional approval by having that amount.

It doesn't have to go to Congress to get approved. And that's why we're consulting with the administration to try to make sure that this money is as targeted as best that it can, that it can't be used by rogue regimes, terrorist supporters, or by China to prey on poor countries and get their debt-trap financings repaid through the use of these SDRs.

ALEXIS CHRISTOFOROUS: Congressman, I want to switch gears for a minute and get your take on something that came out today, a federal judge overturning a national eviction moratorium, saying that the CDC really never had the power to institute that. Landlords have been saying for a long time we can't keep these tenants in there for free. On the other hand, the tenants are saying, we just can't afford to pay during the pandemic. Where do you sit on that? You know, what might the effect be on our economic recovery if this moratorium does indeed get lifted?

FRENCH HILL: Yeah, thanks for raising this issue. It's a thorny issue for both landlords and tenants during the pandemic. One thing we did was obviously issue the CARES Act checks for families. We also increased the unemployment compensation to $600 a week on top of state unemployment. Now that's less now than it was at the height of the pandemic.

But the whole logic behind $600 a week plus state unemployment was to make sure that families had those immediate resources when they were shockingly laid off from their job because of the closing of a restaurant, their hotel, the business that they were associated with. So that's how Congress, on a bipartisan basis, tried to help those families struggling to pay rent.

Secondly, in the December omnibus bill, we actually put some rental assistance money that can be applied for by either the landlord or the tenant. And I tried very hard to get that money focused on those tenants that were in arrears, as you point out, that had really struggled to pay rent, and they were severely behind.

But unfortunately, my colleagues did not go along with that. But I really think we have those tools to help families, the unemployment compensation and the rental assistance that was provided by Congress. And as we open up and get people back to work, hopefully that will help those families before they can get back to full-time work.

KRISTIN MYERS: All right, Congressman French Hill, thanks so much for joining us today.