Written by Eric Martin and Sean Donnan
A U.S. plan to raise billions of dollars in extra funding from the World Bank to counter China's lending to developing countries was a highlight of President Joe Biden's talks with G20 leaders last year. Less than nine months later, I hit a dead end.
The plan, endorsed by Biden and the White House at the Group of 20 summit in New Delhi last September, would send $3.3 billion to the World Bank, led by new president Ajay Banga.
The money will be used to generate more than $25 billion in U.S.-supported loans and grants to developing countries. This was part of a broader plan to increase the World Bank's funding by $200 billion with injections from other shareholders.
The White House pitched the move, which must be approved by Congress, as a countermeasure to China's lending practices around the world, which are used as a means of economic coercion.
But the proposal has failed to win Congressional approval and has failed to attract similar bids from other G20 allies and G7 countries that are more closely aligned with the United States.
As the World Bank and International Monetary Fund host their spring meetings in Washington this week, their setbacks are set on Capitol Hill by a major funding conflict over aid to Israel, Ukraine and a bitter dispute over U.S. border security. covered up.
The lack of progress raises questions about U.S. leadership in multilateral institutions such as the World Bank and how the U.S. focus on China, which is also a major shareholder in the IMF and World Bank, is negatively impacting multilateral institutions. The question arises as to whether this is true.
A spokesperson for the Biden administration's National Security Council said in a statement that the administration remains committed to supporting the bank's increased financial resources and is making an active request to Congress in its fiscal year 2025 budget proposal. . The spokesperson said the proposal to strengthen the World Bank was the most cost-effective way to provide financing to developing countries.
The U.S. Treasury Department did not comment on recent new funding moves, but noted that the United States contributed $1.9 billion to multilateral development banks last year and provided more than $145 billion to developing countries. did. Under the Biden administration, the United States also contributed $1 billion to the United Nations Green Climate Fund, which aims to help developing countries reduce greenhouse gas emissions and adapt to climate change.
Jay Shambaugh, the Treasury undersecretary for international affairs, said in a speech in Washington last week that Mr. He emphasized that he was requesting.
He also cited broader efforts to reform the World Bank and expand its resources, led by former Mastercard CEO Ajay Banga, whom the United States appointed last year.
“All stakeholders will recognize the United States as a committed partner and leader in realizing this vision,” Shambaugh said.
The Biden administration has also faced criticism that domestic political challenges have prevented it from meeting international commitments, and how this dysfunction has damaged America's ability to maintain post-World War II economic leadership. It shows how much you are giving.
Karen Mathiasen, a former Treasury official and U.S. representative at the World Bank who now works at the Center for World Development think tank, said it was a miscalculation for Biden to make the promise of additional funding the centerpiece of his G20 appearance. .
Even then, that prospect seemed remote in the Republican-controlled House, she said. Matthiassen said her allies followed Biden's example and reneged on their own commitments, leading to “public demonstrations of weakened American leadership,” she said.
Republicans have opposed Biden's campaign to get the World Bank to focus on climate change, and many have doubts about the international organization.
Matthiassen added that the Biden administration is unlikely to garner support in Congress for additional World Bank funding unless Democrats take control of both chambers of Congress in the November elections.
“It was particularly risky for Mr. Biden to commit to this largely green aid at the G20 meeting, knowing that House Republicans would never approve it, and reinforced the view that the United States would not keep its promise,” DJ Nordquist said. said. He served as the U.S. representative on the bank's board during the Trump administration.
World Bank President Banga said financial institutions will become faster and more efficient and ultimately said it needed to scale up.
The World Bank's two main lending arms committed a combined $72.8 billion last year, bringing total lending since 1945 to about $1.4 trillion.
Banga replaced David Malpass, who was appointed by President Trump in 2019 and resigned almost a year early last June.
Banga's appointment is an opportunity for the Biden administration to evolve the Washington-based agency to focus more on climate change, as environmentalists have said Malpass has not shown leadership on the issue. becomes. Mr. Malpass rejected that view and defended his own record on climate.
First published: April 17, 2024 | 8:10am IST