World Bank under Trump: What’s next for US influence and funding?

As Donald Trump’s incoming administration focuses on “America First” policies, a transactional approach to foreign aid, and potential cuts to aid funding, its posture towards the World Bank and other multilateral institutions remains uncertain. Experts consulted by Devex agree that the administration’s approach will depend on which voices prevail within the U.S. Treasury Department and the administration’s overall priorities. “It’s a matter of who prevails in the argument: is this important for U.S. foreign policy or not that important,” Rob Mosbacher, a former head of the Overseas Private Investment Corporation, the predecessor of the U.S. International Development Finance Corporation, told Devex. “There is no good way of judging that at this point.” One potential blueprint is the Heritage Foundation’s Project 2025 playbook, which asserted that the U.S. Treasury Department plays a critical role in shaping the World Bank and International Monetary Fund and should “force reforms and new policies.” At the same time, it said the U.S. should withdraw from and “terminate its financial contribution” to the World Bank and the IMF, recommending instead that the U.S. provide economic or humanitarian aid unilaterally to avoid “expensive middle-men” or entities with interests that don’t align with the U.S. That leaves a range of options for engagement. Experts told Devex that staff members appointed to key roles and the level of attention the Treasury Department dedicates to the World Bank will be key. “Anyone who thinks they know what will happen is pushing their own agenda,” a former government official told Devex. The Trump administration will be transactional and policy can change if there is a better deal to be had, a former government official told Devex. “There is no underlying philosophy for most of what he does other than he perceives it to be good for America,” the former government official said. “That could be the World Bank or to blow up multilaterals, especially if someone who works for him feels strongly one way or the other.” Most don’t anticipate a full U.S. withdrawal from the World Bank, a move that would have severe consequences for the institution’s ability to lend. The Trump campaign did not respond to questions about whether it would encourage the U.S. to withdraw from the World Bank, according to the Associated Press. What seems likely is that the U.S. will seek to leverage its influence to achieve objectives aligned with the administration’s priorities. Trump will welcome participating in the World Bank and other multinational organizations, but it will be conditional, former Florida Rep. Ted Yoho told Devex. “There'll be some challenges, you know, it's gonna be a rocky road because there's gonna be an American first policy,” he said. “I think when we go to the World Bank, there'll be certain conditions. We'll participate in this, you know, but you're not going to dictate to us what we're going to do.” Ultimately Congress and the administration could either take an interest in the bank or ignore it.“It’s hard to know how they’re going to react and what voices Trump is going to listen to,” an expert in World Bank affairs told Devex. However, a case can be made, particularly for Republicans who are cautious about spending, that the World Bank offers value by leveraging small amounts of money to achieve a larger impact, the expert in World Bank affairs said. “But it’s also a little leap of faith because it's not a domestic U.S. government agency and they don’t control everything that goes on there and that might outrage some people in the Trump camp,” the expert added. Is the past prologue? While Trump’s second administration may differ from the first, a look back at its actions and policies towards the World Bank could provide some insight into what is ahead. His first administration backed a $13 billion World Bank capital increase in April 2018 when David Malpass, then a Treasury official, negotiated the deal using U.S. leverage to secure lending reforms that raised borrowing costs for middle-income countries, including China, and set a path for China to graduate from World Bank funding. “It was transactional and they cut a deal,” an expert on World Bank matters told Devex, adding “the bank got a capital increase and made some reforms.” That’s not that unusual because shareholders often have conditions attached to their funding commitment, the expert added. When it came to other funding — such as for the World Bank’s International Development Association, its fund for the lowest-income countries — the Trump administration recommended cuts to a pledge former President Barack Obama made before leaving office. In the end, there was a slight reduction, with other donors filling the gap. Many may also remember that President-elect Trump’s daughter Ivanka Trump, who served as a close adviser to her father in the first term, had a particular interest in the World Bank. She worked with the bank to create the Women Entrepreneurs Finance Initiative, or We-Fi — also known as the “Ivanka Fund” at the time. “I don’t know if that will repeat or not. Ivanka doesn't seem to be involved,” an expert on World Bank matters told Devex. While communication might not go through her, a similar technique could work, the expert said. Banga’s approach World Bank President Ajay Banga has outlined a pragmatic strategy for engaging with the incoming administration. Navigating political changes among shareholders is nothing new for him. In less than two years on the job, he noted in a CNBC interview, there has been a change in the governments of all the bank's largest shareholders. "Finding ways to ensure that we as a bank can answer the cause of development in different parts of the world is something that transcends one administration or the other," Banga told Reuters. He also called for people to focus on Trump’s actions and not speculate about what they think he might do, which “isn’t going to get us anywhere.” “Let’s watch his actions, watch his deeds, and work with him on explaining why these things are good for American business, for European businesses, and for everybody else,” he said in an interview with Bloomberg TV in November. In multiple interviews, Banga stressed that if the World Bank’s work can be explained in a way that aligns with his priorities, then Trump will understand the value of the institution. “My experience with President Donald Trump in the first term was that he listens to practical reason, no spin, so give him the facts and let him take his own judgement,” Banga said in the CNBC interview. “What I am going to tell him is what I’m trying to do which I think transcends any administration: make it work faster, make it more efficient, make it work as a better partner with the other MDBs, get the private sector in and make sure you drive jobs. Now tell me which part of that doesn't sound like anyone’s right agenda.” Banga’s push for efficiency, more private sector engagement, and job creation align with Trump’s priorities, but potential conflicts could arise over climate funding. The World Bank has committed to allocating 45% of its financing to climate-related projects by the end of the year, a goal that may clash with Trump’s climate skepticism. In media interviews, Banga has said the bank will continue to pursue its climate goals and look for ways to explain its work to the administration. “There is an opportunity because I think he’s business and private sector focused. The challenge part will be making sure he understands what we’re trying to do in a fair transparent way,” he said. Early signals Personnel choices will play a critical role in shaping U.S. policy towards the World Bank. During Trump’s first term, Malpass surprised many observers by not only negotiating a capital increase but later becoming the institution’s president. Eric LeCompte, executive director of Jubilee USA Network, which works on debt and poverty issues, noted that early appointees to key Treasury Department roles indicate a belief in the U.S.’s role in the World Bank and IMF. But some key roles may take time to fill. “There may or may not be different kinds of challenges to multilateralism,” he said, adding that, as before, engaging with the IMF and the World Bank will be important for the Trump administration. Another early indicator of funding will be Trump’s first budget request. While Congress often disregards presidential budget requests, it can signal priorities and policies. How much money the administration requests for IDA, and how much Congress eventually approves will be a first key test. The Biden administration pledged $4 billion over three years at the IDA replenishment in December. Policy priorities There are numerous unanswered questions about potential policy priorities, how ongoing bank reforms might evolve, and more. The bank is also approaching a critical shareholding review designed to realign shares and voting power. This shareholding review process would be challenging under any circumstances, but a realignment of shares seems less likely in a Trump administration, a policy expert told Devex. Under Biden’s administration, the U.S. pushed for reforms at the World Bank aimed at expanding the institution’s capacity by stretching its balance sheets and improving lending efficiency. While the “evolution” as the bank calls it, is well underway and endorsed by the Group of 20 major economies, it's unclear exactly how the Trump administration might want the institution to change. Erik Bethel, who was the U.S. representative at the World Bank during Trump’s first term, called the bank a “phenomenal institution with a lot of well-intentioned people,” on a recent podcast. He explained that, unlike the United Nations, where each country gets one vote, influence at the World Bank is tied to the shares you hold. He highlighted several areas where he believes the bank could do better. He argued that institutional incentives are often misaligned, suggesting that the bank should reward countries for lifting themselves out of poverty rather than motivating them to avoid graduation from subsidized funding to maintain access to favorable loans. The bank also needs to change how it incentivizes employees to show results, he said. The institution is too bureaucratic and slow and loans are often programmed years in advance, which means that by the time the funds are disbursed, the priorities may have changed or the funding isn't as effective as it could be, Bethel said in the podcast. The administration may push the bank to streamline its bureaucracy, another policy expert said, which should align with Banga’s existing work to reduce inefficiencies and speed up project timelines. Bethel also cited concerns about China during his tenure, noting that the country was one of the larger recipients of World Bank loans. World Bank lending to China has declined significantly in recent years, in part due to U.S. pressure. Those interested in countering China should be mindful of the role that the multilateral development banks and development finance institutions play, Mosbacher said. But they might also argue that the U.S. is not reaping enough advantages from its contributions and should cut back support, he said. “Banga is very politically astute, I suspect he understands what some different arguments are and he’s doing his best to make the case,” Mosbacher said. Another potential area of focus for the U.S. is the distribution of World Bank contracts. Experts told Devex that while American companies tend to win contracts when they bid, they often do not participate in these opportunities. Demonstrating tangible benefits for American companies could be an important part of engagement with the administration, and Banga has already indicated plans to make that case.