US Treasury Secretary: US will stay engaged with World Bank, IMF

One of the big questions going into the World Bank-International Monetary Fund Spring Meetings was whether the United States would engage with the institutions, and if so, how? On Wednesday, U.S. Treasury Secretary Scott Bessent provided some answers. “The IMF and World Bank serve critical roles in the international system, and the Trump administration is eager to work with them, so long as they can stay true to their missions, and under the status quo, they are falling short,” he said at an event organized by the Institute of International Finance. The IMF should focus on global monetary policy and fiscal stability and the World Bank should hone-in on poverty alleviation and economic growth, he said. “The Bretton Woods institutions must step back from their sprawling and unfocused agendas which have stifled their ability to deliver on their core mandates,” Bessent said. The Trump administration plans to use its leadership and influence to push the institutions to meet their mandates and demand accountability for real progress, he said. “The IMF and the World Bank have enduring value. The mission creep has knocked these institutions off course. We must enact key reforms to ensure the Bretton Woods institutions are serving their stakeholders, not the other way around. Bringing balance back to global finance will require clear-eyed leadership from the IMF and World Bank,” he said. Here’s what Bessent said he wants to see at the World Bank: • A focus on helping low- and middle-income countries grow their economies, reduce poverty, increase private investment, support private sector job creation, and reduce dependence on foreign aid. “It offers transparent and affordable, long term financing for countries to invest in their own development priorities,” he said. • “The bank should no longer expect blank checks for rapid buzzword centric marketing accompanied by half hearted commitments to reform,” he said. “As the bank returns to its core mission, it must use its resources as efficiently and effectively as possible, and it must do so in ways that demonstrate tangible values for all member countries.” • It should prioritize energy access using an “all-of the above” strategy that responds to countries energy priorities and can provide baseload power. He didn’t rule out renewables, but said they should be used to supplement other more reliable forms of energy, namely natural gas and other fossil fuels that can effectively power factories and economic growth. He commended the World Bank’s recent efforts to remove prohibitions on its support for nuclear energy and African Development Bank Mission 300 initiative to expand energy access to 300 million people in Africa by 2030. “The history of humanity teaches a simple lesson, energy abundance sparks economic abundance,” he said. • A stronger implementation of the bank’s graduation policies so it can focus more on lending to lower-income, less creditworthy countries, where it can have the biggest impact. “There is no justification for this continued lending. It siphons up resources from higher priorities and crowds out the development of private markets. It also disincentivizes countries’ efforts to move away from dependency on the World Bank and toward job-rich private sector-led growth. Going forward, the bank must set firm graduation timelines for countries that have long since met the graduation criteria,” he said. One of the main targets of this policy should be China, which he said has no business being classified as a developing country and should no longer borrow from the bank. “If China wants to play a role in the global economy commensurate with its actual importance, then the country needs to graduate up. We welcome that,” he said. • Procurement policy shifts that move from targeting the lowest cost bids to those that provide the best value. The subtext here is also fewer contracts with Chinese-owned or backed firms that often can offer the lowest bids because of their government backing. Here’s what Bessent said he wants the IMF to do: • Focus on promoting international monetary cooperation, facilitate the balanced growth of international trade, encourage economic growth, and discourage harmful practices. And it should stop devoting a “disproportionate” amount of time and resources to climate change, gender, and social issues and stay focused on macroeconomic issues, he said. • Be a “brutal truth teller” and not be overly optimistic. The U.S. needs to get its financial house in order and be open to critique, but the IMF must also critique the countries that “most need it,” he said, including countries such as China that have “pursued globally distorted policies and opaque currency practices.” • More proactively push nations to work with borrowing countries to address debt distress, he said. • Continue its role in stepping in to help countries in exchange for economic reform, and not shy away from withdrawing support if they don’t meet their commitments. He praised the IMF's recent $20 billion bailout for Argentina. Bessent closed his speech by saying that “America first means we are doubling down on our engagement with the international economic system, including the IMF and the World Bank,” but he wants the system to better serve the interests of the U.S. and all other participants in the system.