If the US leaves the IMF and WB... will it be a 'gift' to other countries?

After President Donald Trump signed executive orders officially withdrawing the US from the Paris Agreement on climate change and the World Health Organization (WHO), people are talking about the possibility that Washington will continue to leave more global organizations, including the International Monetary Fund (IMF) and the World Bank (WB)...

The "Project 2025" plan advises the US to withdraw from both the IMF and the WB. (Source: Shutterstock)

Speculation mounts

Speculation about Washington’s potential withdrawal from global financial institutions has grown, especially after Treasury Secretary Scott Bessent was absent from the G20 meetings. Notably, the 900-page Project 2025 policy blueprint for President Trump’s second term, advises the US to withdraw from both the IMF and the World Bank.

Project 2025 describes these organizations as “expensive intermediaries” that allow Washington’s money to be controlled before it reaches foreign projects. If the White House boss implements this strategy, America’s departure could be imminent.

The United States and its allies established the IMF and the World Bank in the ashes of World War II to promote global economic stability, encourage integration, and prevent future conflicts. The IMF acts as a lender of last resort for countries facing economic crises; it has helped countries such as Greece, Argentina, and even the United Kingdom during times of financial difficulty.

The IMF provides emergency funds and precautionary credit lines, but the loans come with strings attached. Countries receiving aid must implement economic reforms, such as cutting wasteful spending, increasing budget transparency, tackling corruption or improving tax collection. Investors also rely on IMF data, such as GDP and growth figures, to determine the repayments on debt instruments tied to economic performance.

A number of emerging market countries are heavily reliant on the IMF. Argentina, for example, cannot pay its public sector salaries without the IMF, while a number of other countries from Senegal to Sri Lanka are relying on IMF cash.

Meanwhile, the World Bank provides low-interest loans to help countries develop infrastructure, from railways to flood protection systems. It also creates a framework for financial initiatives such as green bonds and provides risk insurance.

Developed countries that fund these institutions, including the United States, have used them to ensure global financial stability and encourage countries to adhere to open, fiscally responsible economic models.

In addition, both the IMF and the World Bank claim to be reputable organizations, providing standard technical expertise on a wide range of topics for economies, from irrigation to central bank transparency.

“Disaster”, “Gift” and...

According to The Strategist (Australia), the US withdrawal from the IMF and the World Bank would be a serious mistake, depriving itself of the ability to shape the rules of the international monetary order and pursue its strategic interests. It is no coincidence that the IMF and the World Bank are located near the US State Department, the Treasury Department and the US Congress. Washington has always maintained tight control over both organizations, from shaping policy, selecting leaders to approving important decisions.

Accordingly, the authors of Project 2025 seem to have misunderstood how these organizations are funded and operated. If the US withdraws from the IMF and the WB, it will lose important economic leverage and reduce its global influence. In fact, these two organizations are tools for the US to support its allies and control financial flows to countries.

“It would be a disaster,” said Kaan Nazli, head of emerging market debt at Neuberger Berman. As a founding member, Washington holds the largest stake in each organization (about 16% in the IMF and slightly less in the World Bank), giving American policymakers a powerful influence on the decision-making process that global economic leaders follow. But a US withdrawal would be surprising, given that these organizations have given Washington a large influence at relatively low cost.

Analysts say the US withdrawal would be a “gift” to China and other countries seeking to become global leaders. They may be willing to fill the void, as Beijing has been pushing to reorganize the IMF’s “shareholdings” to strengthen the voice of emerging economies. The world’s second-largest economy also wants a bigger role in global institutions, while its current share is just over 5%.

Even if the US does not leave, but merely withdraws funding, a change in the shareholder structure would upset the balance of power. Member countries with larger voting power could then suspend US voting rights for failing to meet financial obligations. If the suspension lasts longer than a year, Washington would automatically lose its membership unless a majority votes to reinstate it. At the World Bank, US companies would have less access to contracts and jobs financed by the bank...

Furthermore, many studies have shown that the lending model of the IMF and the World Bank is closely linked to the national interests of the United States. The IMF is often considered the “first responder” to protect the US economy. During Mr. Trump’s first term, the IMF provided a $57 billion loan – the largest bailout package in the fund’s history – to Argentina. Meanwhile, the World Bank also “supported” the US in strengthening security alliances, addressing terrorist threats and supporting post-war reconstruction, such as in Iraq and Afghanistan…

During Trump’s first term, legislation was drafted to withdraw the US from the WTO but never implemented it. Now, President Trump has ordered a comprehensive 180-day review of US participation in all multilateral organizations to determine whether to withdraw.

“I hate to predict things like this,” President Trump told Fox News when asked about the White House’s decision and the possibility of a US recession in 2025. “We’re going through a transition period, because what we’re doing is so great — we’re bringing wealth to America, it’s going to take a little while.”

Meanwhile, Treasury Secretary Scott Bessent warned of a “cleansing period” as the US economy cuts government spending.

Bank of England Governor Andrew Bailey has expressed concern that the US government's review could also prompt Mr Trump to withdraw from the IMF and WB. And President Trump is a very practical person.

Source: https://baoquocte.vn/neu-my-roi-imf-va-wb-se-la-mon-qua-cho-cac-nuoc-khac-308220.html