Will US Lose Control of World Bank?

U.S. Secretary of State Hillary Clinton shakes hands with World Bank President Robert Zoellick. Photo by: Ryan Rayburn / World Bank / CC BY-NC-ND

Will a reduction in U.S. multilateral assistance undermine the country’s influence in international matters?

move by a House Appropriations subcommittee to slash multilateral assistance by $729 million below last year’s level to $1.6 billion has sparked a debate about the wisdom of cutting U.S. contribution to development banks at a time when emerging economies are challenging the leadership selection process in these institutions.

U.S. officials have expressed concerns that the funding cuts will weaken the country’s control over international financial institutions such as the World Bank, where the U.S. maintains veto power over governance changes and whose president has always been an American, while European governments designate the managing director of the World Bank’s sister institution, the International Monetary Fund. This leadership arrangement between the U.S. and Europe, which goes back to the 1940s, has been receiving flak for allegedly running against the principles of openness, transparency and meritocracy.

The issue bears particular significance with the World Bank’s leadership slated to change next year as the term of its president, Robert Zoellick, ends.

For U.S. Treasury international affairs undersecretary Lael Brainard, the funding cuts would mean that the U.S.’s “long-term national security prospects will be hampered in fragile countries.”

The State and foreign operations appropriations bill for fiscal 2012 was approved by a House appropriations subcommittee last week. But its full committee markup has been delayed following a debt deal that is expected to have grave implications on the government’s foreign aid budget in the next 10 years.

The House proposal is also $2.1 billion lower than the $3.7 billion that President Barack Obama requested for multilateral assistance and does not provide funding for the president’s requested general capital increases for multilateral development banks despite Obama’s pledge to give such banks access to about $60 billion in new capital.

The way Center for Global Development President Nancy Birdsall sees it, the budget debate “adds to the general sense that the U.S. is in a corner like a beleaguered old man, and that we need the new energy that comes from China, India and Brazil. I don’t see why the U.S. has to be in that position.”

But even if the proposed cuts are approved by the Republican-dominated House, these will still be subject to approval by the Democratic-dominated Senate, where they are not presumed to get strong support.

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About the author

  • Che

    Che de los Reyes

    As a senior staff writer, Che focuses on international development breaking news coverage as well as interviews and features. Prior to joining Devex, Che handled communications for local and international development NGOs and government institutions in the Philippines.