While it often seems that we are living in unprecedented times, for the Bretton Woods Committee, this moment echoes the past. In 1980, the Heritage Foundation published a blueprint for government reform called “Mandate for Leadership.” This list of policy recommendations was meant to give the incoming Reagan administration a roadmap for his first 100 days.

The mandate included bold proposals, some of which came to fruition: a proposal to cut marginal income tax rates by twenty-five percent across-the-board formed the basis of Reagan’s 1981 tax reform. More to the interest of our founders, it also discussed international financial institutions (IFIs). While the need for their reform was already the topic of debate, the mandate went further, questioning their utility.

“Given the enormous growth of the international capital markets in the 1970s,” the mandate said, “are those institutions really needed to funnel capital to the less developed world?”

It was out of this lack of confidence in the IFIs that the Bretton Woods Committee was originally formed to be a voice of support. Then, the global economy entered recession in the early 1980s. Mexico experienced a sharp decline in export revenue, and the conditions for a broader Latin American debt crisis loomed. The world was quickly reminded of the value of the IMF and World Bank through structural adjustment programs designed to restore growth and bring back economic prosperity.

By 1984, in an address at the Bank/Fund Annual Meetings, President Reagan removed any doubt about his administration’s commitment to the IFIs:

He went on to note, "The United States remains honored to be one of the founding fathers of both organizations. Besides their enormous contributions to individual freedom, prosperity, and initiative, these multilateral organizations are effectively handling even greater responsibilities as the technological revolution ushers in an increasing velocity of human transactions and greater global economic interdependence."

Are the IFIs Fit for Purpose? 

The utility of the IFIs is in focus again in the Trump 2.0 administration. The Project 2025 proposal published by the Heritage Foundation recommends U.S. withdrawal from the IMF and World Bank. An executive order directs the United States to scrutinize and cease funding certain United Nations organizations, including the UN Human Rights Council (UNHCR) and the UN Relief and Works Agency for Palestine Refugees (UNRWA). It also mandates a comprehensive review that will provide recommendations for withdrawal or reform of US support to all international organizations to ensure alignment with national interests. The review is scheduled to be completed by August 2025. We’re keeping an eye on nominations to key U.S. Treasury posts who will be responsible for shaping the U.S. view on the IFIs. So far, only Treasury Secretary Scott Bessent has been confirmed.

We suspect real world events will lead the Trump administration to a similar conclusion the Reagan administration reached: these institutions serve a vital U.S. national interest and U.S. leadership in the institutions is indispensable. Instead of concentrating on U.S. participation, we are pleased to see some thought leaders in the administration and Congress asking a far more constructive question: “Are these institutions addressing current and emerging challenges as effectively and efficiently as possible?”

The Back-to-Basics Agenda

Representative French Hill (R-Arkansas) is the new Chair of the House Financial Services Committee. Stemming from his background in banking, as well as substantial experience working in the Senate, White House, and U.S. Treasury during the George H.W. Bush administration, his colleagues look to his leadership on IFI issues. We know from the past several years of his public statements that he shares Former Treasury Undersecretary Jay Shambaugh’s view that the IFIs should employ a Back-to-Basics approach on the IFIs. In 2023, Hill said: 

Hill’s previous legislation gives us insight into what may be on the agenda for IFI reform for the 119^th Congress. He has repeatedly urged the IMF to get out of the climate business and focus on its role as lender of last resort. On SDRs, he has asked for more congressional oversight following the most recent allocation in 2021.

Chairman Hill recently introduced a bipartisan bill calling on the World Bank and the European Bank for Reconstruction and Development to support nuclear energy financing. The bill builds on calls from the United States and a coalition of other governments to push the World Bank and other IFIs to provide financing for nuclear energy projects.  

World Bank President Ajay Banga is leading a review of the Bank's policy prohibiting nuclear financing in an effort to invest in a stable energy mix so countries can continue to develop. A renewed push by the U.S., alongside developing countries, may yet persuade holdouts on the World Bank's board to end its decades-old prohibition of nuclear financing.

Money, Money, Money: Appropriations Heat Up

Congress may come to a resolution this week to avoid a government shutdown and to fund the government for the remainder of the 2025 fiscal year. It will then turn its full attention to funding for the 2026 fiscal year. We’ll be paying attention to a few specific pieces throughout the budgeting process.

Regarding the World Bank, we’ll be watching for signals on US support of the International Development Association (IDA), the World Bank’s lending arm for low-income countries. FY25 spending is the last year of IDA’s 20^th replenishment, with a new three-year agreement on spending levels negotiated in December 2024 by the Biden administration. They pledged $4 billion to IDA, with funding spread over three years—meaning the first installment would be expected in the FY26 budget. The first Trump administration calibrated IDA spending down by 15% from the U.S.’s pledge. Another calibration seems likely given Congressional belt-tightening, but there is a question as to what extent the pledge will be lowered.

The Presidential Budget Request may be our first insight into what to expect from this administration on IDA. A Presidential Budget Request is statutorily required in February, but presidential budgets are almost always late in the first year of a new administration, so we expect to see it sometime this spring.

In heartening news, a bill exempting IDA from SEC registration requirements for issuing debt again passed the House Financial Services Committee 49-0. This exemption has long been enjoyed by not only other multilateral development banks but other arms of the World Bank, a problem BWC has pointed out. Ranking Member Waters’s bill would boost IDA’s ability to raise capital in the U.S. bond market and lower costs for IDA overall at no taxpayer cost.

We are also watching for developments on the IMF quota increase included in last year’s budget request. That agreement would increase the United States’ IMF quota shares, or paid-in capital, coupled with a corresponding reduction in US commitments to the New Arrangements to Borrow (NAB), the IMF’s secondary line of defense. If enacted by Congress, this change would bring about a shift in resources rather than a net increase in US financial commitments. The agreement also holds constant the voting power of the United States and other member countries on the IMF’s board.

Unfortunately, prospects for the legislation’s inclusion in a budget agreement are slim. Historical reluctance to include significant changes in stop-gap funding bills, heightened polarization, and thin vote margins are all working against the change. If the IMF quota increase does not make it into the FY25 spending bill, we will be watching the 2026 budget process for signals on its prospects.

More Money, Money, Money: Stablecoins

Beyond the IFI space, we’ve also been keeping a close eye on the ongoing debate around digital assets. BWC has built a substantial library of digital assets work, and based on recent executive actions, these issues look to be a policy focus in the Trump 2.0 administration. 

In step with current legislation, a recent BWC publication underscored the importance of US leadership in shaping the regulatory framework for stablecoins—digital tokens designed to function like traditional fiat currency on the blockchain.

Recently, Republicans in both the House and Senate have introduced bills aimed at establishing a regulatory framework for stablecoins. While skepticism toward Central Bank Digital Currencies (CBDCs) remains strong among many Republicans, there is bipartisan agreement that stablecoins, when properly regulated, offer significant benefits.

The proposed legislation would provide for regulatory guardrails dividing regulation between state and federal entities, add issuers to anti-money laundering requirements, and increase operational standards. We will continue to track this legislation closely, and are encouraged the U.S. is moving toward a stable, secure, and innovation-friendly digital asset regulatory framework.