Joe Biden is working on gaining international support to increase the World Bank’s lending capacity. This comes as the US faces pressure to fund efforts against climate change and counter China’s economic influence. The plan is to expand the World Bank’s lending capacity by $25 billion for middle-income and low-income countries, with the goal of increasing it even further to over $100 billion if other nations join in. Other countries, such as Colombia, Peru, Jordan, India, Indonesia, Morocco, Nigeria, Kenya, and Vietnam, could potentially benefit from increased lending from the World Bank.
The Biden Administration wants to provide alternatives to China’s Belt and Road Initiative, which has been criticized for its opaque lending terms. The recent Brics summit and concerns about development finance have further emphasized the need for the US to counter Beijing’s economic alliances. Emerging economies are facing challenges with rising interest rates, high energy prices, and the costs associated with climate change. They are seeking more favorable financing terms.
India’s presidency of the G20 has embraced the plan to expand the World Bank’s funding. The final communique is expected to reflect this plan, aiming for better and more effective multilateral development banks with increased lending capacity. However, it remains uncertain how many specific pledges the Biden administration will secure alongside its own. European officials support increasing the World Bank’s funding but lack consensus on the amount, timing, and potential governance reforms.
The EU is prioritizing reform to increase the voice of global south countries in multilateral development banks. They are seeking broader support for adjustments to current frameworks, acknowledging the need for inclusivity and addressing developing countries’ concerns. However, the US, as the largest shareholder in the IMF and the World Bank, is likely to approach reform cautiously to protect its voting power and influence over major decisions.
In addition to expanding the World Bank’s funding, Biden has requested Congress to boost the IMF’s preferential fund for low-income countries. He also hopes that G20 countries can provide meaningful debt relief for struggling economies in cooperation with China, the largest bilateral creditor to many distressed states. While China’s President Xi Jinping will not attend the G20 summit, his deputy and Beijing’s head of economic policy Li Qiang will be present.
There are doubts about the achievements of this year’s G20 conference, with many leaders being more focused on domestic issues. A revamped World Bank may not be enough for the US to shift the balance of economic power in the developing world, as China’s economic presence is significant. The demand for financing exceeds what multilateral development banks currently provide.