© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen testifies before a Senate Appropriations Financial Services and General Government Subcommittee hearing on President Biden’s proposed budget request for the Department of the Treasury for fiscal year 2024,
By Andrea Shalal
WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen said she remained vigilant to downside risks facing the global economy, given the negative economic consequences of Russia’s war against Ukraine and recent pressures on banking systems in the United States and elsewhere.
In remarks prepared for a news conference, Yellen said the global economy was in a better place than projected last fall, with energy and food prices having stabilized and supply chain pressures continuing to ease. A price cap on Russian oil was helping to stabilize global energy markets while reducing Russia’s primary source of revenue, she added.
Yellen, speaking at the start of a week of meetings at the International Monetary Fund and World Bank, said the U.S. labor market was strong, but inflation was remained too high, although prices had moderated.
The U.S. banking system remains sound, with strong capital and liquidity positions, and the global financial system is resilient due to the significant reforms enacted after the 2008 financial crisis, she said.
The U.S. government last month took emergency actions after the failures of Silicon Valley Bank and Signature Bank (OTC:), and subsequently announced steps to increase supervision of mid-sized banks that do not require approval by the split Congress.
“Still, we remain vigilant to the downside risks,” she said.
She said Treasury was committed to working through global bodies like the Financial Stability Board and the Basel Committee on Banking Supervision, while addressing vulnerabilities in nonbank financial institutions.
Yellen said high debt burdens posed a “significant economic headwind for too many countries,” with more than half of all low-income countries near or in debt distress, and called for steps to improve the international debt restructuring process.
She said she was encouraged that China – the world’s largest sovereign creditor – had agreed to provide specific and credible financing assurances for Sri Lanka, but said China and all of Sri Lanka’s creditors needed to deliver on commitments. Yellen also called for completion of a debt treatment for Zambia and the rapid establishment of a creditor committee for Ghana.
Yellen said she would rally international partners to continue supporting Ukraine as it continues to defend itself against Russia, and to keep putting pressure on Russia to end the war through sanctions and other measures.
“Over the past year, our campaign has systematically degraded Russia’s military-industrial complex and helped reduce the revenues that Russia can use to fund its war,” she said. “This year, a central piece of our strategy is to take further actions to disrupt Russia’s attempts to evade our sanctions.”
Washington’s three-pronged approach involves improving information sharing and coordination among allies, putting pressure on companies and jurisdictions that are helping Russia evade sanctions, and shutting down specific channels used by Russia to equip and fund its military.