Joe Biden is pushing to secure international support to expand the World Bank’s lending capacity, as Washington comes under intense pressure to fund the fight against climate change and offer a viable alternative to China’s economic influence.
The US president and top officials in his administration have prioritized efforts to enhance the financial firepower of the multilateral lender at the G20 leaders’ summit in New Delhi this weekend.
The US plan aims to increase the World Bank’s lending capacity for middle-income and low-income countries by $25bn, with the potential to reach over $100bn if other nations also pledge similar amounts. “We’re working to make sure other partners follow our lead,” said Jake Sullivan, the US national security advisor.
The urgency for the Biden Administration to counter Beijing’s economic alliances and address global challenges has grown due to recent events, including the Brics summit in South Africa and concerns that Washington has disproportionately assisted Ukraine at the expense of other nations. Emerging economies are struggling with rising interest rates, high energy prices, and expenses related to climate change, leading them to seek better terms for financing. “It’s not just a question of responding to China, it’s a question of addressing long-standing global challenges,” explained Janet Yellen, the US treasury secretary.
Sullivan emphasized that the plan to increase the World Bank’s funding is not “against China,” but rather imperative to provide alternatives to China’s Belt and Road Initiative, which operates on opaque terms. The White House has identified several countries that could benefit from increased World Bank lending.
The Indian presidency of the G20 has embraced the plan, emphasizing the need to strengthen multilateral development banks and confront core issues. European officials also support increasing the World Bank’s funding, although there is no consensus on the amount or timing.
The US will require congressional approval for its funding, which could be challenging given Republican control. The Biden administration has formally asked lawmakers for $2.25bn to expand the World Bank’s lending capacity.
In addition, Biden has requested Congress to bolster the IMF’s preferential fund to help low-income countries and provide meaningful debt relief to struggling economies, which would require China’s cooperation. However, Chinese President Xi Jinping will not attend the G20 summit.
Wang Yiwei, a professor at Renmin University, expressed doubts about the conference’s achievements, as many leaders are focused on domestic issues. A revamped World Bank alone may not be enough to shift the balance of economic power in the developing world, given China’s significant influence and the demand for financing surpassing what the MDBs currently provide.
Additional reporting by Joe Leahy in Beijing
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