US Treasury Secretary Bessent accuses IMF and World Bank of ‘mission creep’ – What is it to the economy?

US Treasury Secretary Scott Bessent asked the International Monetary Fund and the World Bank to get back to their core missions of developing economies and maintaining macroeconomic stability. He said that the two organizations had become too involved in meaningless projects, making them less effective.

According to Bessent, the IMF and World Bank have gradually shifted from their mandate to devote disproportionate time and resources to work on projects like climate change, gender, and social issues. He called the projects “vanity projects”

He said, “The IMF and World Bank have enduring value. But mission creep has knocked these institutions off course. We must enact key reforms to ensure the Bretton Woods institutions are serving their stakeholders – not the other way around.”

Bessent says that the World Bank should be tech-neutral

Scott Bessent said that the IMF should focus on its key mandate and adhere to strong standards in its lending. According to him, the IMF must also say “No” sometimes. The group is not obligated to give money to countries that don’t make reforms. This comes after Argentina hit a $20 billion deal.

Bessent also encouraged the World Bank to invest in gas and fossil fuels. He said that the World Bank must be tech-neutral and prioritize affordability in energy investment. 

“In most cases, this means investing in gas and other fossil fuel-based energy production […] In other cases, this may mean investing in renewable energy coupled with systems to help manage the intermittency of wind and solar. ” He said.

In addition, Bessent said that Trump’s administration is eager to work with them as long as they can stay true to their missions. He added that the administration wants to increase US leadership in those groups, “America First does not mean America alone.”

Project 2025 has failed to get rid of the IMF and World Bank

Since Project 2025, a hard-right Republican policy framework tied to Trump’s second term, Trump has fought against foreign organizations that depend on the US. Project 2025 called both the IMF and World Bank “expensive middlemen” that move US money worldwide.

Concerns about the US’s future involvement in the IMF and World Bank have grown since Trump pulled the US out of the Paris Climate Agreement and the World Health Organization. In February, he also gave the order to review all US-funded foreign organizations within 180 days. 

The US has, however, benefited a lot from these institutions, both economically and by projecting soft power. The US has the most votes in both the IMF and the World Bank, which means it can effectively block big decisions. 

If the US pulled out, it could cause an immediate liquidity crisis for the IMF and World Bank, which depend on US contributions for a lot of their $1.5 trillion in resources. Moreover, a US pullout would be a strategic gift to China, which has already spent a lot to grow its global influence.

However, for now, China is counting on the IMF or World Bank getting weaker. This would cause countries that are having trouble paying their debts or building infrastructure to turn to China’s institutions more. 

In addition, China and the other BRICS countries from the Global South started the New Development Bank (NDB) in 2015. The NDB is often seen as a competitor to the World Bank. The NDB challenges Western financial power by giving loans with fewer requirements and encouraging lending in currencies other than the dollar.

If the US left, the IMF and World Bank would have to move their offices from Washington, DC, to somewhere else, maybe Japan, which is their second-largest backer. This would work against the US. 

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