Explanation of Position on a Second Committee Resolution on an International Financial System

Jenni Kennedy
U.S. Adviser to the Second Committee
New York, New York
November 22, 2022


Thank you, Madam Chair. I would like to take this opportunity to thank the facilitator for his extraordinary work on this complex resolution.

The United States is pleased to join consensus, but we must disassociate from operative paragraph 42, which contains a reference to certain “unilateral economic, financial, or trade measures.” Economic sanctions are an appropriate, effective, and legitimate tool that can be used to achieve national security and foreign policy objectives, and the United States is not alone in that view or in that practice. In cases where the United States has applied sanctions, we have done so with specific objectives in mind, including as a means to promote a return to rule of law or democratic systems, or respect for human rights and fundamental freedoms, or to respond to threats to international security.

We take this opportunity to clarify our position on a few issues.

With respect to PP24 and OP38, it is usually not the role of the official sector to intervene in the specific methodologies and/or practices of private credit-rating agencies. Issues related to determination of sovereign ratings should be resolved between private industry and the sovereign entities subject to the ratings. There is no clear indication that the ratings assigned by the rating agencies are not evidence- or fact-based. Additionally, we would clarify that we are not aware of participation in the Debt Service Suspension Initiative (DSSI) that had an impact on sovereign ratings as the DSSI’s terms specified the treatments were to be net present value neutral and participation by the private sector was fully voluntary.

With respect to PP25, we disagree with referencing IMF quota reform without mention of the new quota formula as a guide because we see a streamlined formula as the best way to meet the guiding principles for the quota review, particularly to be simple and transparent. We appreciate reference to the new quota formula in OP24alt.

With respect to OP8, we disagree with including language stressing “the need to consider an increase in concessional funding from multilateral development banks,” as the level of concessional funding is already considered during replenishment negotiations conducted by these institutions’ respective governance bodies. We also view the language on “consideration of global financial system reform” to be too vague to have practical meaning.

With respect to OP19, we disagree with language that encourages the provision of “flexible, concessional, fast-disbursing, and front-loaded assistance” without regard to the financial sustainability of the institutions, the development impact and effect on poverty reduction of such assistance, or the presence of an appropriate macroeconomic policy framework. The concessionality of assistance is determined by governance bodies of the International Financial Institutions, which allocate limited concessional resources considering income and creditworthiness. Furthermore, this language could be read as encouraging multilateral development banks to refrain from adhering to the high social, environmental, and fiduciary standards that are essential to achieving sustainable development.

Finally, regarding our position on trade, the WTO, Special Drawing Rights, concessional finance, technology transfers, and economic sanctions, we refer to our General Statement delivered on November 21.