This week, the two major financial institutions in the world held their annual meetings in Washington, D.C., and financial officials were tense about who would emerge as the winner of the White House.
The United States is the largest donor to the International Monetary Fund (IMF) and the World Bank. With the upcoming election in two weeks, a potential return of former President Trump to the White House could lead to a request for a review of their relationship with Beijing, such as calls for reciprocity.
If Vice President Harris is elected, there is hope for continued deepening of multilateral cooperation on climate change issues, promising and requesting more financial contributions from the United States.
“The United States is indeed the main funder of these organizations,” Clemence Landers, a senior researcher at the Global Development Center and former U.S. Treasury official, told Politico. “The election results will have significant implications on how much funding the United States continues to provide.”
Mark Sobel, the U.S. chair of the Official Monetary and Financial Institutions Forum and former U.S. representative to the IMF, told Politico that there is currently a tense atmosphere at the two major financial institutions. Participants are behind the scenes discussing the future implications of the U.S. election on multilateralism, interdependence, and the role of the United States in the world.
Officials in the Biden-Harris administration have been supportive of U.S. involvement in world financial institutions, emphasizing the critical role these institutions play in addressing the negative “spillover effects” of China’s economic policies.
A senior Treasury official even called for increased scrutiny of China’s lending and exchange rate policies earlier this month.
As part of the plan, the Biden administration is set to pledge additional funds to the International Development Association in December. This association is a subsidiary of the World Bank that provides financing to the poorest countries. Additionally, they plan to raise $100 billion for an international development, health, and climate fund in the coming year, hoping to secure funding.
All of these funds are pending approval from the new U.S. government and Congress. Organizations like the Global Development Center have indicated that fundraising efforts for next year are facing obstacles.
It is expected that Harris would continue Biden’s policies, which are more inclusive of the multilateral order. However, both Harris and Trump’s political stances cater to the increasingly inward-turning U.S. electorate, including tougher stances on China and costly campaign promises.
Amid ongoing wars in the Middle East and Ukraine, and efforts in most parts of the world to combat low economic growth and dangerous levels of debt, the U.S. economy, though appearing prosperous on the surface, is recognized by voters as not doing as well as four years ago.
The power balance between the White House and Congress is likely to have a significant impact on global financial institutions moving forward.
Matt Swinehart, a former Treasury official who served in the Obama, Trump, and Biden administrations, told Politico, “If Trump is elected president, the scrutiny will focus on how Beijing benefits from and is involved in these global financial institutions.”
This struggle may come to a head next year when the IMF is expected to begin readjusting its donor quotas, potentially considering allocating a larger share to Beijing to reflect its economic size but also giving it more voting power.
“I don’t think there will be wholesale layoffs at these institutions,” Swinehart added. “Most of the candidates considered for these positions by the president are aware that leaving or not engaging meaningfully is futile.”
World Bank President Ajay Banga, at a press briefing last week, stated that another major lending arm of the bank had seen a substantial increase in donated funds during Trump’s first term in office.
Geoffrey Okamoto, who served in the Treasury Department during the Trump era and later as the number two official at the IMF (now at Goldman Sachs), said, “The Trump administration played a role in increasing resources in exchange for appropriate reforms at these global financial institutions, some of which were absolutely necessary.”
However, he also added that these financial institutions may find it challenging to negotiate with Trump.
Okamoto noted that the United States, given its significant foreign aid budget, can provide bilateral support in many instances. Previous U.S. administrations, including Trump’s, have used the IMF as a multilateral tool, with instances of providing economic support to Jordan, a key geopolitical ally of the United States.