IMF and World Bank chiefs need to earn US trust, says Bessent

Washington — US treasury secretary Scott Bessent on Wednesday said IMF chief Kristalina Georgieva and World Bank President Ajay Banga are both good leaders but must earn the Trump administration’s trust by refocusing the institutions on their core missions.

Bessent told reporters that no decision has been made on whether to proceed with a $4bn pledge to the World Bank’s fund for the poorest countries, the International Development Association, made last year by then-President Joe Biden.

That decision, he said, will depend on US budget negotiations and the bank’s progress in improving its focus on development outcomes, or getting “back to basics.”

Bessent, in his first major remarks on the two US-headquartered international financial institutions, called for both to refocus on their core missions of macroeconomic stability and development, arguing that they have strayed too far into vanity projects such as climate change that have reduced their effectiveness.

Speaking at the institutions’ spring meetings, Bessent acknowledged the critical roles both the IMF and World Bank play in the international financial system, but took issue with what he called “mission creep”.

“The Trump administration is eager to work with them, so long as they can stay true to their missions,” Bessent said in earlier remarks to the Institute of International Finance.

“The IMF and World Bank have enduring value. But 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 round,” he said, calling on US allies to join the effort.

“America first does not mean America alone,” he added.

Bessent told reporters later that he had met with both Georgieva and Banga, and his speech should not have come as a surprise for either.

“I think they are good leaders, and I hope they will earn the confidence of the administration in the coming months through their actions,” he said.

The Trump administration is reviewing its participation in international institutions, and has already pulled out of some, including the World Health Organisation, raising concerns it could also exit the IMF and World Bank. The US is the largest shareholder in both institutions.

France’s central bank chief, Francois Villeroy de Galhau, on Tuesday, waded into the debate as well. He called for preservation of both institutions, albeit with a narrower focus on matters such as financial stability and payments.

The IMF and World Bank were set up after the end of World War 2 to help rebuild and support war-torn economies and ensure their stability in the future. In recent years, both have embraced the need to focus on climate change, which has been a drag on growth in many developing countries.

A spokesperson for the IMF said the global lender would continue to work with Bessent and the Trump administration. “We look forward to continuing our engagement with the US authorities on their vision for the IMF.”

Georgieva on Tuesday said the IMF was reviewing how it designs loan programmes, and determines their length and conditions, and planned to focus on structural reforms that emphasised the private sector and growth.

She said the global lender is also looking at countries that have had repeated programmes — namely Argentina, Pakistan and Egypt — to ensure loan programmes were designed the right way.

The World Bank had no immediate response to Bessent’s remarks. But Banga, since taking office in June 2023, has pushed to make the bank more efficient. He has repeatedly emphasised the need to focus on creating jobs, including through expanded work with the private sector.

He is also pushing the bank’s shareholders to embrace a broader energy policy in June, ending a years-long ban on lending for nuclear projects and making it easier to win approval of natural gas projects.

Reuters