In remarks to the Institute of International Finance (IIF) on the margins of last week’s Spring Meetings of the World Bank Group and International Monetary Fund (IMF), US Treasury Secretary Scott Bessent made headlines by exhorting the institutions to “stay true to their missions,” while acknowledging the critical roles they play in the international system. In so doing, he quieted fears that the administration might abandon the very institutions the United States helped to create, instead turning the focus to which items on the institutions’ “sprawling and unfocused agendas” the United States might seek to cut.
To many fearing US withdrawal, the Secretary’s message was a relief but not a surprise. The institutions provide meaningful economic, financial, and geostrategic value to the United States in exchange for modest budget outlays. Their financing models—which rely on pooled resources to issue debt to finance project and programmatic lending in the case of the Bank, and financial support to smooth balance of payments adjustment in the case of the Fund—are incredibly efficient ways to leverage donor resources, while their preferred creditor status protects them from default in all but the most extreme adverse scenarios. Plus, the United States enjoys unparalleled influence in the institutions, thanks to veto power over key decisions and their physical location in Washington, DC.
In addition, many of the areas the Secretary identified for reform have long been on the wish list of US administrations. His critique of the IMF’s “pollyannish outlook” on global imbalances is an obvious example. Bessent’s host at the IIF, Tim Adams, made the same point nearly 20 years ago, when as Under Secretary for International Affairs, he accused the IMF of being “asleep at the wheel” in conducting exchange rate surveillance. Global imbalances are not a new problem, and the IMF is the only institution established to facilitate balanced trade and promote exchange rate stability. The Secretary is right to call on the Fund to do its job and identify countries that pursue “globally distortive policies.”
Bessent’s appeal to “graduate” China from World Bank lending is another example of a long-standing goal sought by past Republican and Democratic administrations alike. China’s economy has made remarkable progress over the past 50 years: in addition to being the world’s second-largest economy at market exchange rates (and largest by purchasing power parity), China is at or near the innovation frontier in many of the technologies that will determine future economic leadership. Given the relevance of “developing country” status to World Bank lending, as well as global trade and international climate architecture, ending China’s status as a developing country is overdue. At the same time, the loss of China and other middle-income countries as World Bank borrowers would negatively impact Bank finances—as these loans generate profits that support subsidized financing for lower-income countries—and should be factored into future projections of its lending capacity. Other elements of the Secretary’s speech—for example, calling out unsustainable lending practices by certain creditor countries and reforming procurement policies—similarly resonate with past US administrations.
But it’s also clear that this speech represents a departure from the past in key ways. The Secretary’s call for countries to move away from dependency on the World Bank in favor of “job-rich, private sector-led growth” echoes the administration’s broader skepticism of the public sector; while the explicit linking of “security partners” to “mutually beneficial trade” aligns with the so-called “Mar-A-Lago proposal” previously advanced by the chair of the Council of Economic Advisors. These comments allude to a desire for more fundamental changes to the international system, but slowing global growth, high debt burdens, and more intense shocks suggest an increased reliance on the Bretton Woods institutions, especially among low-income countries, at least in the near-term.
What’s more, the repeat tendency in the Secretary’s speech to restore equilibrium, restore order, and restore fairness to the international system says little about the upcoming challenges facing the global economy. Country authorities have no choice but to engage with new drivers of economic activity and potential shocks, and the Bretton Woods institutions must evolve to meet their members’ needs. For example, the World Bank has developed expertise in digital transformation, recognizing its importance to underlying development. The IMF has done the same in digital payments and finance given innovations in payments infrastructure and potential impacts on financial stability. Both the Bank and the Fund have advanced workstreams on artificial intelligence (AI), recognizing its potential to boost productivity and innovation on the one hand, and produce shocks to employment, income distribution, and energy demand on the other. These innovations—which did not attract attention in the Secretary’s speech despite the administration’s focus on fintech and AI—are welcome and boost the institutions’ credibility as sources of expertise and capacity development, especially for low- and middle-income countries.
The Bank and the Fund have also been called upon, including by the world’s largest economies, to demonstrate forward-thinking on climate. Yet here, Secretary Bessent’s speech takes a more skeptical tone, urging the institutions to be “singularly focused” on upholding “the kind of sustainability that raises standards of living and keeps markets afloat,” and suggesting that work on climate is crowding out their core missions. This view is regrettably out-of-step with economic reality. A recent report by the Swiss Re Institute found that global economic losses due to natural catastrophes—a category that includes severe convective storms, floods, and wildfires—exceeded $300 billion in 2024 alone and noted the increasing frequency and severity of such events. In a separate report, the Institute estimates that global warming on the current trajectory could result in global economic losses of 7–10 percent of GDP by mid-century.
The World Bank, the IMF, and most member countries recognize this reality and the challenge that climate poses to development and stability. Their work on climate and energy transition goes back decades but has become more central with the increasing severity of climate shocks and the maturation of the global climate architecture. In 2021, the IMF’s Executive Board formally adopted a climate strategy aimed at helping members address climate change related policy challenges; while in 2023, the governing body of the World Bank Group formally endorsed an updated vision and mission for the Bank that recognizes the goals of ending extreme poverty and boosting shared prosperity “on a livable planet.” These developments are significant in that they represent decisions taken by the full membership of the institutions to support the integration of climate into their development and stability mandates. The mechanisms and modalities for this integration will continue to evolve. But the very real economic reality of climate change means the institutions must engage if they are to serve their memberships and be true to their founding missions.
