Treading the Tightrope

The International Monetary Fund and the World Bank are in a difficult position. Established to uphold global rules and support development, they are now caught between an aggressively nationalist America - their largest shareholder - and the rest of the world. If their leaders speak truth to power, they risk US President Donald Trump’s wrath. If they don't, they risk their own legitimacy.

- Ngaire Woods

The challenge of walking this tightrope was evident at last week’s Spring Meetings of the IMF and the World Bank. The IMF’s mandate is to stand guard over countries’ exchange rates and policies that affect global financial stability. This involves “calling out” those whose actions will impoverish their neighbours. So far, the Fund has not named the United States as its main rule-breaker. But ahead of the Spring Meetings, IMF Managing Director Kristalina Georgieva responded to the Trump administration’s unpredictable behaviour by acknowledging the “off the charts” uncertainty caused by US tariffs, reiterating the need for central-bank independence, and urging countries to avoid “self-inflicted injuries.”

In early April, World Bank President Ajay Banga emphasized the Bank’s focus on its core mandate: driving development and reducing poverty. For several decades, the World Bank has supported efforts — particularly infrastructure investments — to lift millions of people out of poverty. But Trump’s dismantling of the US Agency for International Development has decimated programmes that enabled the Bank’s work. Instead of addressing this issue at the Spring Meetings, Banga focused on job creation amid rising unemployment worldwide. The Bank has also begun promoting nuclear and technology-agnostic energy solutions to appeal to a US administration that is allergic to climate action.

How the IMF and the World Bank approach the Trump administration will determine their effectiveness. The first 100 days of Trump's second term offer insights into the strategy they should pursue.