U.S. Financial Institutions Under Scrutiny

By David Lawder and Andrea Shalal

WASHINGTON (Reuters) – U.S. Treasury Secretary Scott Bessent on Wednesday stated that IMF chief Kristalina Georgieva and World Bank President Ajay Banga are competent leaders but need to regain the Trump administration’s trust by aligning their organizations with core missions.

Bessent informed reporters that a decision on a $4 billion pledge to the World Bank’s International Development Association, established by former President Joe Biden last year, remains pending. This decision hinges on U.S. budget negotiations and the World Bank’s ability to enhance its focus on development outcomes, essentially needing to “get back to basics.”

In his initial major comments regarding these institutions, Bessent called for a renewed emphasis on macroscale stability and development, claiming the organizations have deviated from their primary objectives into vanity projects, particularly concerning climate change, which have diminished their effectiveness.

During the institutions’ spring meetings, Bessent acknowledged the significance of the IMF and World Bank within the international financial system, yet criticized what he termed “mission creep.”

“The Trump administration is eager to work with them, as long as they can stay true to their missions,” Bessent mentioned in previous remarks to the Institute of International Finance. He emphasized the enduring value of both organizations but cited the need for reform to ensure that the Bretton Woods institutions prioritize stakeholders instead of deviating from their missions.

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

Bessent’s Vision for the IMF

Later, Bessent indicated that he had met with both Georgieva and Banga and assured that his remarks shouldn’t have surprised them.

“I think they are good leaders, and I hope they will gain the administration’s confidence in the coming months through their actions,” he remarked.

The Trump administration is evaluating its involvement in international organizations, having already exited some, such as the World Health Organization. This raises concerns among some observers about a potential withdrawal from the IMF and World Bank, of which the U.S. is the largest shareholder.

France’s central bank chief, Francois Villeroy de Galhau, participated in the discussion, advocating for the preservation of both institutions while suggesting a narrower focus on areas like financial stability and payments.

Established post-World War II to aid in rebuilding and stabilizing war-torn economies, the IMF and World Bank have evolved to address climate change, which has adversely impacted growth in various developing nations.

An IMF spokesperson commented that the global lender would collaborate with Bessent and the Trump administration, emphasizing anticipation of ongoing engagements regarding the administration’s vision for the IMF.

Georgieva noted on Tuesday that the IMF is reassessing how it formulates and conditions loan programs while making structural reforms aimed at promoting private sector growth. The IMF is also evaluating countries with repetitive programs, such as Argentina, Pakistan, and Egypt, to ensure appropriate loan designs.

The World Bank had no immediate comment on Bessent’s statements. Banga, who has led the bank since June 2023, is advocating for enhanced efficiency and emphasizing job creation through greater partnerships with the private sector.

He is also urging the bank’s shareholders to support a more inclusive energy policy in June, which would end a long-standing ban on nuclear project financing and streamline approval processes for natural gas projects.