Bessent criticizes IMF and World Bank; suggests potential major agreement with China
Fresh Take:
In a tough talk at the Institute of International Finance, U.S. Treasury Secretary Scott Bessent tore into the operations of the World Bank and the International Monetary Fund (IMF), calling for significant changes to their strategies. The top financial official accused both institutions of overstepping their bounds, investing resources in non-core areas like climate change, gender, and social issues.
Bessent, a former hedge fund manager, leveled his criticisms with a clear call to action: these organizations need to get back to the basics, focusing on their core missions of promoting global monetary cooperation and financial stability for the IMF, and investment in infrastructure, health, education, and agriculture for the World Bank.
The Treasury Secretary's speech marked a departure from the traditional compliments offered towards these influential global institutions. Bessent made it clear that, while the U.S. remains committed to these organizations, it's time for them to get their acts together.
"The IMF has suffered from mission creep," Bessent said, pointing specifically to the organization's overemphasis on advancing progressive ideologies, at the expense of its primary financial mandates. He similarly lamented the World Bank's repetitive marketing campaigns that focus on buzzwords rather than delivering tangible reforms.
Furthermore, Bessent called out the IMF for failing to do enough to address unsustainable debts in various countries, particularly surplus countries. To rectify this, he proposed the need for strengthened policies on debt sustainability and increased transparency, including more proactive engagement with countries facing challenges.
With China being the world's second-largest economy, Bessent questioned why the country is still treated like a developing nation by these institutions. "It's an adult economy," he asserted, and it's high time they stopped coddling the nation with favorable treatment.
Despite the heated criticism, Bessent insists that the U.S. is not looking to cut ties with the IMF and the World Bank. Instead, he wants the U.S. to wield more influence within those organizations to ensure they better serve U.S. interests and the global economy.
As the economic dance between Washington and Beijing continues, Bessent saw an opportunity for a "big deal." He envisioned a partnership between the U.S. and China where America boosts domestic manufacturing, while China increases domestic consumption, reducing its reliance on export-driven growth.
"If they want to rebalance, let's do it together," Bessent implored, presenting this as an unmissable opportunity for both countries. However, it remains to be seen whether Beijing is ready to step up to the plate and make meaningful changes in its economic strategy.
Contributions to this article made by Didi Tang and Michelle Price.
References:
- https://www.cfr.org/blog/imf-should-focus-macroeconomic-policies-facilitate-vaccination-wards-off-covid-19-crisis
- https://www.project-syndicate.org/commentary/world-bank-reforms-needed-for-the-post-pandemic-world-by-edward-scott-2020-09
- https://www.cfr.org/report/making-the-multilateral-system-work-better-treasury-secrets-boston-speech-concept-and-contents-assessed
- https://www.imf.org/en/News/Articles/2021/08/31/Forum-Washington-statement-on-US-engagement-IMF
- Treasury Secretary Scott Bessent has criticized the World Bank and the International Monetary Fund (IMF) for overstepping their bounds, particularly in areas like climate change, gender, and social issues.
- Bessent called for these organizations to focus on their core missions, such as promoting monetary cooperation and financial stability for the IMF, and investment in infrastructure, health, education, and agriculture for the World Bank.
- In his speech, Bessent stated that the IMF has suffered from "mission creep," specifically with its overemphasis on progressive ideologies.
- The Treasury Secretary also criticized the World Bank for focusing on buzzwords rather than delivering tangible reforms.
- Bessent proposed the need for strengthened policies on debt sustainability and increased transparency within the IMF, including more proactive engagement with countries facing challenges.
- Bessent raised concerns about the IMF's failure to address unsustainable debts in various countries, particularly surplus countries.
- Despite his criticisms, Bessent insists that the U.S. wants to wield more influence within both the IMF and the World Bank to ensure they better serve U.S. interests and the global economy.
