The International Monetary Fund (IMF) and the World Bank rarely capture headlines outside periods of significant upheaval. A Google search for debt-laden Argentina, for instance, is as likely to bring up articles about IMF loans as it is to celebrate Lionel Messi’s latest football triumph.
The IMF’s latest $20 billion (€17.4 billion) debt relief for Argentina, its largest debtor nation, was announced last week to help libertarian President Javier Milei continue reforming the South American country’s economy after decades of wasteful spending.
However, the World Bank’s work tends to fly under the radar. During the COVID-19 pandemic, it quietly delivered $170 billion in loans and grants to over 100 countries, according to its website, reaching some 70% of the world’s population.
As the IMF and World Bank convene for their Spring Meetings in Washington, DC, from Thursday, they face significant uncertainty. First, US President Donald Trump’s tariff policy is threatening to derail global economic growth. Second, the future of the United States backing of these organizations is up for question.
Project 2025’s push to exit IMF, World Bank
Speculation has been rife since Project 2025, a hard-right Republican policy framework tied to Trump’s second term, proposed a US withdrawal from both institutions, labeling them “expensive middlemen” that redirect US funds globally.
Trump’s withdrawal from the Paris Climate Agreement and the World Health Organization, coupled with an order in February to review all US-funded international organizations within 180 days, has further fueled concerns about the US’s future involvement in the IMF and World Bank. The White House has yet to name executive directors to both bodies, signaling a deliberate pause in engagement.
The US has, however, reaped substantial benefits from these institutions, both economically and through soft power projection. With the largest voting share in both the IMF and World Bank, the US has effective veto power over major decisions. Loans to indebted nations often come with conditions like market liberalization that align with US interests.
Robert Wade, a professor of political economy at the London School of Economics (LSE), thinks a US withdrawal would have serious implications for its global standing.
“Successive US administrations and Congress have long operated as if the World Bank and IMF were agents or arms of the US state,” Wade told DW. “In one way or another, Washington exercises a great deal of influence over their policies.”
Tariffs unsettle investors, but is worse to come?
Trump’s century-high tariffs, announced earlier this month, created significant uncertainty in the global economy, with stock markets selling off sharply. Critics now fear an inward-looking Trump administration could unravel the entire post-Bretton Woods global financial system, which supports trade and stability through floating exchange rates, the US dollar’s dominance and institutions like the IMF and World Bank.
“The Trump administration does not have a coherent position about reforms to the World Bank, IMF, or any other international institution,” Constantin Gurdgiev, an associate professor of finance at the University of Northern Colorado, told DW. “This is a transactional populist, inwardly focused agenda of scoring quick wins at the expense of the international system.”
Any US withdrawal may create an immediate liquidity crisis for the IMF and World Bank, whose combined $1.5 trillion in resources depend heavily on US contributions. Gurdgiev forecast a “significant impact” on their ability to fund effective responses to future crises and said a US pullout would be a strategic gift to China, which has already invested heavily to expand its global influence.
“Both institutions are extremely cost-effective for the US and help it to deliver on its longer-term agenda of pairing the risks from countries like China,” Gurdgiev said.
China’s funding model rivals global lenders
A tally by Boston University’s Global Development Policy Center estimates that China made nearly $500 billion in loan commitments to 100 countries between 2008 and 2021. With a weakened IMF or World Bank, countries in debt distress or seeking infrastructure funding may increasingly turn to China’s institutions, amplifying Beijing’s geopolitical leverage.
In 2015, China and other BRICS nations of the Global South launched the New Development Bank (NDB), often seen as a rival to the World Bank. The NDB offers loans with fewer conditions and promotes lending in non-dollar currencies, challenging Western financial dominance.
A US exit would also prompt the relocation of the IMF and World Bank’s headquarters from Washington, DC, potentially to Japan, the second-largest backer. Wade notes that China, underrepresented in voting shares (6.1% in the IMF), would fiercely oppose this.
How might Trump negotiate a better deal?
“Trump could argue, ‘Increase your funding, and you’ll gain a larger vote share,'” Wade said of the US president’s possible negotiation tactic. “It’s more likely that the US would make at least a serious threat to leave the World Bank [rather than the IMF].”
While regional banks like the Asian Development Bank or the Inter-American Development Bank could partially fill the World Bank’s role, alternatives to the IMF are scarce. BRICS efforts to create an IMF counterpart have stalled.
Gurdgiev argues that Trump is looking to the IMF and World Bank to be “cheerleaders” for his high-tariff, America First policy agenda and sees Washington making moves to curb China and other BRICS nations’ influence in both organizations.
“But those institutions have enough intellectual integrity to understand how dangerous these policies are to both the US and global economy,” he added.
Storm clouds over global economy
Indeed, there are growing concerns that Trump’s aggressive trade policies, if fully enacted and retaliated against, have the potential to trigger a major global financial crisis. The IMF is due to lower its growth forecast for dozens of countries on Tuesday as the choking of global trade puts pressure on the debt burdens of many nations.
“The global financial situation now is very fragile and could easily tip into a financial crisis,” warned Wade, the political economy professor. He predicted that Trump would be forced to “pull back” from any talk about leaving the IMF and World Bank “if clear signs of a debt crisis emerge.”
Gurdgiev, meanwhile, warns that a lack of engagement by Washington in both institutions only adds to the current pessimism about Trump’s economic policies and the US’s future role in global affairs. This precariousness, he believes, could create a systemic crisis at a time when both the IMF and World Bank are severely weakened.
“We are neutering the ability of institutions that act as a lender of last resort to do their jobs,” Gurdgiev, who is also a visiting professor at Trinity College Dublin, warned. “It’s a complete and utter nonsense.”
Edited by: Rob Mudge
