U.S. Calls for Global Financial Reform Amid Rising Debt Concerns

The U.S. Treasury's economic diplomat urges the IMF and development banks to provide short-term liquidity support to low- and middle-income countries. Jay Shambaugh cautioned about debt crises and criticized China's economic policies. He advocated for creative financing strategies to aid countries’ sustainable development without harming infrastructure investments.

The U.S. Treasury is pushing the International Monetary Fund and multilateral development banks to devise methods for offering short-term financial relief to low- and middle-income nations. The move aims to prevent debt crises, said Jay Shambaugh, the Treasury undersecretary for international finance, during a recent Atlantic Council event.

Shambaugh, who manages the U.S. stake in the IMF and World Bank, noted that developing financing mechanisms is crucial as many countries are facing increasing debt burdens. He highlighted that some nations are nearing significant principal repayments and added that the global debt architecture is under pressure.

Additionally, Shambaugh criticized China's economic approach, focusing on manufacturing subsidies, which he argues might lead to industrial overcapacity and impact other countries' economies. He suggested China shift support to household spending to stimulate domestic demand, further demanding that the IMF hold China accountable for its economic policies.

(With inputs from agencies.)