Joe Biden is working to win international support to expand the World Bank’s lending capacity as Washington faces intense pressure to finance the fight against climate change and offer viable alternatives to China’s economic influence.
The U.S. president and his top administration officials have put strengthening the financial strength of multilateral lending institutions at the top of the agenda for this weekend’s G20 leaders’ summit in New Delhi.
U.S. government officials said the U.S. plan would expand the World Bank’s lending capacity to middle- and low-income countries by $25 billion. If other countries make similar commitments, that number could rise significantly to more than $100 billion, which is Washington’s target at the G20 summit and in the coming weeks.
“We are working hard to ensure that other partners follow our lead,” National Security Adviser Jake Sullivan told reporters this week.
While support from other countries and the U.S. Congress is far from guaranteed, the Biden administration’s need to counter Beijing’s efforts to expand its economic alliances around the world has become more urgent.
The recent BRICS summit in South Africa and the perception by some that Washington is helping Ukraine too much at the expense of other countries in need have put the issue of development financing higher on the U.S. agenda.
At the same time, emerging economies have been grappling with rising interest rates, high energy prices and rising costs related to climate change. This leaves them pressing for financing on better terms.
“This is not just a question of responding to China, but a question of addressing long-standing global challenges,” U.S. Treasury Secretary Janet Yellen told reporters in New Delhi on Friday. “We hope other countries will join us based on their financial capabilities and we can scale this up.”
Sullivan insisted that the plan to increase the World Bank’s coffers was not “targeted at China.” But he also said it was “vital” for countries to find alternatives to Beijing’s Belt and Road Initiative, which has opaque loan conditions.
The White House said countries including Colombia, Peru, Jordan, India, Indonesia, Morocco, Nigeria, Kenya and Vietnam could benefit from more World Bank lending.
India, which holds the G20 presidency, has embraced the plan.
“What India has done is bring in the concerns and priorities of the global South and try to go beyond the standard approach to solving the real problems,” said V Anantha Nageswaran, Modi’s chief economic adviser. “For example, with multilateral development banks, we can’t Hopefully, the 800-pound elephant in the room is eliminated: the financing capabilities of these institutions.”
Part of India’s mission in the financial track negotiations is to “strengthen multinational development banks by confronting the core issues rather than avoiding them,” Nageswaran said.
The plan will be reflected in a final communiqué, according to a draft seen by the Financial Times. The document, due to be released on Sunday, states that the organization is “committed to delivering a better, more effective multilateral development bank with improved lending capabilities, improved responsiveness and accessibility, and enhanced operating models”.
But it’s unclear how many specific commitments the Biden administration will make with itself at the G20 or at next month’s upcoming annual meetings of the World Bank and International Monetary Fund in Morocco.
Additionally, the U.S. will need Congress to approve its own portion of the additional World Bank funding, which could be a tough sell for Republicans who control Congress. The White House has formally asked lawmakers to provide $2.25 billion to the World Bank, which will be leveraged to expand a $25 billion loan.
European officials said that while EU member states generally support increased funding from the World Bank, there is no consensus on the amount, timing and whether it will be combined with long-discussed reforms to the bank. Governance.
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For the EU, reform is a more urgent task. Its Board of Governors Chairman Charles Michel is preparing to push for broad support for changes to the way multilateral development banks operate at the United Nations General Assembly later this month.
Two people familiar with the matter said the change would give countries from the Global South a greater say in a body historically dominated by U.S. and EU officials.
“The fundamental point . . . is a matter of international financial governance,” a senior EU official said of the “fragility” of developing countries’ trust in existing frameworks.
“The plan is inclusive. There is a sincere and legitimate impression across much of the world that they were not involved in these decisions,” said the official involved in G20 preparations. “There are problems with the Bretton Woods institutions and they need to be reformed.”
However, as the largest shareholder of the International Monetary Fund and the World Bank, effectively giving them veto power on major decisions, the United States is expected to be very cautious about reforms that increase China’s voting power and influence.
In addition to pushing for more World Bank loans, Biden is asking Congress to support the International Monetary Fund’s concessional fund to help low-income countries, allowing it to expand lending by $21 billion.
Biden is also expected to ask G20 countries to provide “meaningful debt relief” to struggling economies between now and meetings of the International Monetary Fund and World Bank. This will require the cooperation of China, the largest bilateral creditor for many troubled countries.
Chinese President Xi Jinping will not attend the G20 summit, sending his deputy and Beijing’s economic policy chief Li Qiang to take his place.
Wang Yiwei, a professor at Renmin University of China, said there were doubts about what this year’s conference would accomplish because many attendees were distracted by domestic issues. “Even if Xi Jinping does leave, he won’t have so many important decisions to make,” Wang said. “The interest of many leaders will be focused on their campaigns.”
A restructured World Bank may still not be enough for the United States to change the balance of economic power in developing countries.
“China is a very big fish,” said Karen Mathiasen, a former U.S. Treasury official and current program director at the Center for Global Development. “Financing needs far exceed what multilateral development banks can provide.”
Additional reporting by Joe Leahy in Beijing
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