Luetkemeyer Delivers Opening Remarks at Hearing on International Financial Institutions in an Era of Great Power Competition
Washington, May 25, 2023
Tags: Financial Services
WASHINGTON, D.C. – Today, Congressman Blaine Luetkemeyer (MO-03), Chairman of the National Security, Illicit Finance and International Financial Institutions Subcommittee led a hearing entitled, “International Financial Institutions in an Era of Great Power Competition.” Chairman Luetkemeyer’s opening remarks can be found below.
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“First, thank you to our witnesses for being here today. You offer a wide and deep expertise on International Financial Institutions and global economics, and we look forward to your insights.
“Over the past year, in an effort to rein in the decades-high levels of inflation sparked by the reckless government spending, central banks shifted from a prolonged period of extraordinary monetary policy ease to one of aggressive monetary tightening.
“The Federal Reserve, the European Central Bank, and the Bank of England all increased interest rates at the fastest pace in decades while also withdrawing liquidity by not rolling over a meaningful part of their large bond portfolios.
“One consequence has been that some 60% of low-income countries now face ‘debt-distress,’ meaning there is a risk they may be unable to meet their financial obligations without debt restructuring or debt forgiveness – especially as global economic growth slows.
“This parlous international economic situation makes today’s hearing especially timely and relevant.
“The International Financial Institutions were established after the Second World War to address global economic challenges, both to help cultivate economic growth and, in the case of the IMF, be the world’s ‘financial crisis firefighter.’
“However, many now question whether these organizations remain up to – or even focused on – these, their core responsibilities.
“There are two major reasons for this.
“First, China has played a growing and uncoordinated role, providing funding far beyond what could be provided by traditional sources for white elephant projects that sink countries into debt traps. At least 65 countries owe Chinese lenders more than 10% of their external debt.
“When countries enter financial distress, these large levels of opaque Chinese debt impede restructuring attempts, as the Chinese refusal to cooperate in the process leads to fears that any support will just flow to Chinese creditors rather than helping to resolve the borrowing nation’s economic crisis.
“Ironically, at the same time the World Bank continues to loan China more than $1 billion annually and China remains one of the Bank’s largest debtors.
“China is also by far the largest beneficiary of World Bank spending.
“The GAO recently released a study entitled, ‘World Bank: Borrower Countries’ Contracts to Businesses in the U.S. and to Entities Potentially on U.S. Sanctions or Other Lists of Concern,’ which I would now like to ask unanimous consent to submit for the record. The study found that between 2017 and 2021, Chinese companies won about 29% of all World Bank contract dollars.
“The second reason for concern about the IFIs’ fitness is that these institutions are increasingly diverging from their traditional development agenda to impose western elites’ green agenda on the developing global South.
“Nowhere is that neo-colonial effort more clear than in the vital area of energy, where institutions like the World Bank will fund neither nuclear power, the cleanest, most productive zero emission source, nor natural gas, the incremental improvement from coal or wood that allowed our country to reduce emissions more than any other country in the world.
“This even as European nations scour the African continent for alternatives to Russian gas for themselves while hypocritically denying these very countries financing for natural gas projects.
“In the meantime, because developing nations are demanding nuclear, gas, and mining projects that the Bank sanctimoniously refuses to consider, Russia and China fill the gap, setting standards and establishing long term relationships even as European countries and the Biden Administration pat themselves on the back for their own green purity.
“In its budget request for Fiscal Year 2024, the Biden administration sought a 70% increase for IFIs largely to fund this counterproductive green agenda. This Congress needs to take a hard look at how such an investment would possibly help hardworking American taxpayers, or whether it would instead help Russia and China.”