Potential Impact of U.S. Support Cuts on World Bank Ratings

By Marc Jones
LONDON (Reuters) – The credit ratings of the World Bank and other multilateral lenders are at risk if U.S. President Donald Trump reduces support for them, according to Moody’s. However, such a move is deemed unlikely.

Last week, Trump signed an Executive Order to review U.S. government contributions to international organizations, including a potential withdrawal from some United Nations groups.

Moody’s stated, “The US is a key shareholder in a number of rated MDBs (multilateral development banks), hence it would be credit negative if it materially reduced its commitment to them.”

The U.S. is the largest shareholder of the World Bank Group, holding a 16.4% share in the International Bank for Reconstruction and Development (IBRD) and 19% in the International Development Association (IDA), which offers concessional loans and grants to impoverished countries.

While the World Bank declined to comment on Moody’s report, the U.S. also has a 30% stake in the Inter-American Development Bank in Latin America, 15.6% in the Asian Development Bank, and 10% in the European Bank for Reconstruction and Development.

Trump’s review of U.S. support for development banks is expected to take around six months. Most institutions have frameworks that allow for an “orderly withdrawal” of a shareholder.

Moody’s indicated it is “unlikely” that the U.S. would take drastic measures regarding its participation in key MDBs due to several factors, including the potential loss of influence over lending policies.

The U.S. has invested about $3.7 billion in the IBRD with callable capital commitments of $49.2 billion, while the IBRD’s total loans and guarantees amount to approximately $263 billion. With an average loan maturity of 8.4 years, the U.S. would remain liable for IBRD’s lending for many years.

A withdrawal could create opportunities for other nations, particularly China, which has sought a greater role in the IBRD, a prospect historically opposed by U.S. administrations.