A storm is brewing over Washington’s commitment to global financial institutions, with US Treasury Secretary Scott Bessent’s absence at the G20 meetings fueling concerns about a potential American pullback from the International Monetary Fund (IMF) and World Bank. The prospect of the United States stepping away from these institutions is raising alarm bells worldwide, reported Reuters.
Why the IMF and World Bank matter
Born from the ruins of World War II, the IMF and World Bank were designed to stabilize economies and prevent future conflicts. The IMF acts as a lender of last resort, providing crucial financial lifelines to struggling nations—whether it was Greece during its debt crisis, Argentina amid repeated defaults, or even the UK in 1976.
Meanwhile, the World Bank funds major infrastructure projects, from railways to renewable energy, and helps countries develop financial frameworks. Both institutions are instrumental in shaping economic policy and investor confidence worldwide.
Who needs the IMF?
For many countries, IMF support is the difference between economic survival and collapse. Argentina, for instance, depends on IMF cash to pay government salaries, while nations like Sri Lanka and Senegal rely on IMF-backed programs to stabilize their finances.
Investors also view an IMF-backed reform plan as a sign of stability. “The IMF has long been an anchor for debt investors,” said Yerlan Syzdykov, head of emerging markets at Amundi, Europe’s largest asset manager. Even nations like Saudi Arabia use IMF benchmarks when issuing loans to ensure their funds are being used effectively.
What’s at stake if the US steps back?
A US withdrawal from these institutions would be nothing short of a global financial earthquake. Washington holds the largest voting share in both the IMF and World Bank—giving it a powerful voice in shaping economic policies worldwide, reported Reuters.
“If the US pulls out, it would be a disaster,” said Kaan Nazli, an emerging market debt portfolio manager at Neuberger Berman. The move would leave a leadership vacuum, allowing China to expand its influence by increasing its stake in these institutions. China has long sought a bigger role in global financial governance, pushing for a realignment of IMF shareholding to strengthen emerging market voices.
A US exit could also jeopardize the institutions’ AAA credit ratings, making it harder for them to lend at low-interest rates. Additionally, American businesses would lose access to World Bank-funded contracts, affecting sectors ranging from construction to technology.
Is the developing world ready to move on?
Despite its crucial role, the IMF is not always welcomed with open arms. Its demands for economic reforms—such as cutting fuel subsidies or raising taxes—often trigger public backlash. In Kenya, deadly protests erupted over IMF-backed tax hikes, and the Fund’s response to the 1997 Asian financial crisis was widely criticized.
Still, only a handful of countries—such as Cuba, North Korea, and Taiwan—choose to remain outside the IMF. The reality is, despite frustrations, most nations see these institutions as indispensable.
As speculation over the US commitment continues, one thing is clear: any American retreat would not only shake the foundations of global finance but also hand China a golden opportunity to reshape the system in its image.