Shortly thereafter, Saudi Arabia’s minister of finance approved the kingdom’s 2026 borrowing plan, projecting total financing needs of $57.9 billion. The proceeds are intended to fund a projected fiscal deficit of $44 billion, equivalent to 3.3 percent of Saudi Arabia’s gross domestic product (GDP).

This financing was highly successful, but as detailed in this report, the markets do not price Saudi Arabia as AA credit. In fact, Saudi Arabia trades at a discount to single A-rated sovereign debt, suggesting that the kingdom has work to do to build confidence in the country’s ambitious economic transformation plans, while showing the marketplace that this nation has the ability to generate accretive value generating returns.

Notably, while the Saudi Ministry of Finance constructed the 2026 budget on assumptions of slowing aggregate global demand for crude oil, the revenue outlook embedded in the projections implies a more constructive view on oil prices. As detailed in the table below, oil revenue, captured within “Other Revenue,” is budgeted at 64 percent of total revenue in 2026, unchanged from 2025. This suggests that hydrocarbons remain the dominant fiscal pillar, even as diversification accelerates. 

By contrast, Goldman Sachs, in a December 2025 report titled “Saudi Arabia: FY2026 Budget Targets Significant Consolidation,” takes a more skeptical view of the kingdom’s fiscal outlook, driven largely by oil revenue assumptions. Goldman estimates a budget deficit of 6 percent of GDP, compared with the government’s projection of 3.3 percent, implying that Saudi Arabia may ultimately need to borrow additional capital to finance its growth ambitions.

Saudi Arabia’s widening fiscal deficit, alongside a growing current account deficit, reflects an economy firmly in investment-led growth mode. This is simply a function of a government that is spending more on expenditures than revenues, the definition of an expansionary fiscal policy. In addition, a widening current account deficit is by definition an economy investing more than it has in savings. Taken together, this showcases the government’s commitment to funding growth. Sustaining this trajectory will require continued access to both domestic and external financing markets. During the first week of January, the kingdom demonstrated precisely that access by issuing $11.5 billion of senior unsecured bonds, drawing reported demand in excess of $20 billion from global fixed-income investors, particularly for longer-duration tranches.

The transaction underscored Saudi Arabia’s strong market standing, supported by moderate debt levels, manageable debt-service ratios, and substantial foreign reserve buffers. In addition, Saudi Aramco’s partial public listing has created an additional channel through which the state can access and monetize future oil cash flows, enhancing fiscal flexibility alongside sovereign borrowing. Assuming borrowing remains aligned with economic growth and fiscal discipline, access to capital markets should remain durable.

The diversification of the Saudi economy over the past decade has been significant. Non-oil GDP has risen from approximately 56 percent of total GDP in 2016 to roughly 65 percent in 2026, according to data compiled by the Saudi General Authority for Statistics and International Monetary Fund estimates. Nonetheless, oil revenues remain the primary fiscal driver, and any assessment of Saudi Arabia’s budget outlook is incomplete without considering global energy market dynamics.

In its Global Energy Perspective 2025, McKinsey & Company notes that while fossil fuels are likely to retain a meaningful share of the global energy mix beyond 2050, demand is expected to plateau between 2030 and 2035.

Neal Shear, founder of Morgan Stanley’s commodities platform and former global head of sales and trading, observes that “it is hard to accurately predict peak global demand for energy.”

“However, it is much easier to come to a consensus that the secular trend line for fossil fuel demand is downward over the next decade,” he told me.

Shear further argues that today’s crude oil market is increasingly demand-driven rather than supply-driven, rendering global supply dynamics closer to a zero-sum game. Incremental barrels from countries such as Venezuela may displace production elsewhere, rather than expand overall consumption. Over time, absent commensurate supply discipline, a downward-shifting demand curve implies secular downward pressure on prices.

The year 2026 marks the tenth anniversary of Vision 2030, Saudi Arabia’s ambitious economic transformation strategy. The program’s core objective of diversification away from hydrocarbons into sectors such as petrochemicals, tourism and hospitality, mining, healthcare, manufacturing, retail, construction, and finance has materially reshaped the kingdom’s economic landscape over the last decade.

Looking ahead, policymakers could further strengthen market confidence in two key areas. First, financial markets and more broadly investors would welcome greater fiscal transparency, particularly a clearer breakdown of oil-related revenue assumptions and the treatment of Saudi Aramco dividends within the budget framework. As it stands, the Saudi budget does not delineate this dividend in full, so it is not readily transparent to investors how much of the budget is being driven by oil revenues. Second, as investment scales, there should be a stronger emphasis on capital efficiency and risk-adjusted returns. Transparency around outcomes, including those that underperform, would likely enhance, rather than diminish, investor confidence.

The chart below shows that Saudi sovereign bonds trade at wider spreads than those of AA-rated peers, consistent with the kingdom’s split credit ratings. More notable, however, is that spreads also exceed those of single-A sovereign benchmarks, suggesting that markets continue to apply a degree of caution beyond what headline ratings alone would imply. Part of this reflects technical factors, including index inclusion, but it also points to a broader question of confidence as Saudi Arabia advances its Vision 2030 agenda. As the scale of public investment rises, sustained fiscal transparency, clearer articulation of oil-revenue assumptions, and demonstrable capital efficiency will be critical in translating economic transformation into tighter sovereign risk premiums.

Source: Vaneck, JPM Indices (Saudi Arabia Sovereign Spread JPGCSASS Index, EMBIGD A Spread JPSSGDCA Index, EMBIGD AA Spread JPSSGDAA Index)

Markets do not demand perfection; they value clarity, discipline, and resilience. Saudi Arabia’s long-term strategy is coherent, ambitious, and increasingly credible. If executed with continued transparency and fiscal prudence, it has the potential not only to transform the kingdom but to reshape the broader region. The US debt capital markets, for now, appear to agree.

Khalid Azim is the director of the MENA Futures Lab at the Atlantic Council’s Rafik Hariri Center for the Middle East.

The post Why US markets are betting on Saudi Arabia  appeared first on Atlantic Council.

Bottom lines up front

• Venezuela needs to attract foreign investment to revive its economy and oil production. To do that, it needs to reduce its debt service costs.
• The IMF can help Venezuela address its debt overhang; a recently passed reform could allow the institution to provide support even if China were to block or delay a debt restructuring.
• The Trump administration can help support the IMF’s efforts to stabilize Venezuela, which should include a speedy restructuring that provides for a comparable treatment of different creditor classes.

WASHINGTON—Without US support, Venezuela’s post-Maduro government stands little chance of stabilizing its shattered economy. The United States is the main customer for Venezuela’s oil, US creditors hold the bulk of Venezuela’s debt, most bonds were issued under New York state law, and the White House has strong political influence over the new government. But even with US support, an economic recovery will be difficult. It’s too early, for example, to tell whether the United States has sufficient levers to initiate a successful recovery in Venezuela, and it’s unclear whether the government in Caracas is capable and willing to do what’s necessary to make a recovery stick. 

What’s needed first is clear, however. Economic stabilization requires a reduction of Venezuela’s massive debt obligations, which likely exceed $150 billion and are owed to a tangled web of bondholders, arbitration claimants, Russia, and—most problematically—China. Venezuela’s debt is where the Trump administration should start, and it should do so while working with the International Monetary Fund (IMF).

A debt crisis of staggering proportions

Venezuela’s external debt represents roughly 180–200 percent of its gross domestic product, making it one of the world’s largest unresolved sovereign defaults. The $60 billion in defaulted bonds once issued by the government and the state-run oil company Petróleos de Venezuela, SA have ballooned past $100 billion as a result of accumulated interest. International arbitration awards from companies expropriated by the Chávez regime add another $20 billion. And among other creditors, China holds at least $10 billion in bilateral debt, collateralized by oil shipments that give Beijing secured creditor status and operational leverage over Venezuela’s petroleum sector.

Without addressing this debt overhang, Venezuela will find it difficult to attract the massive foreign investment needed to revive its oil production. There are differing assessments of what Venezuela can realistically service while rebuilding its economy, but substantial debt reductions will be necessary. Citigroup, for example, estimates that restoring debt sustainability requires principal haircuts of at least 50 percent. Other estimates suggest even deeper reductions—down to a 30 percent recovery value—to avoid a cycle of repeated defaults that would cause permanent economic dysfunction.

Why the IMF matters

It has been encouraging to see US Treasury Secretary Scott Bessent engage with IMF and World Bank leadership to discuss Venezuela’s economic reconstruction. Given the IMF’s expertise in resolving complicated debt situations and restoring macroeconomic stability, support by the Bretton Woods institutions will be critical.

At the same time, the IMF must be careful to preserve its independence and its legitimacy. Especially in cases of sovereign arrears, the fund needs to be seen as an impartial arbiter that adheres to its legal mandate and its rules-based framework. For example, the decision to recognize a new government in Caracas as a legitimate counterpart—which is necessary for Venezuela to negotiate access to the IMF’s financial resources—is up to the IMF’s executive board and to it alone.

What follows assumes that this prerequisite is met and that the IMF can embark on what is likely to be an extraordinarily complex restructuring effort. The fund has not conducted an economic assessment of Venezuela since late 2004, representing a twenty-one-year gap in formal relations. Moreover, the capacity of the government and central bank to implement necessary policies will need to be demonstrated, and statistical processes will likely have to be substantially rebuilt.

Nevertheless, an IMF program offers something no bilateral arrangement can provide: a multilateral framework that legitimizes deep debt restructuring and provides Venezuela with the financing and technical assistance to implement reforms. While designing a program that gives confidence that future claims on Venezuela will be honored, the IMF can bring credibility to debt sustainability analyses, work closely with diverse creditor groups, and impose program conditionality that prevents preferential treatment of powerful creditors, particularly China.

Who gets paid first?

In this regard, it is important to recognize that the large investment and economic needs of Venezuela should take precedence over short-term payouts to official or private creditors. Neither the IMF nor other creditors will be able to provide fresh funds without being assured that Venezuela has the capacity to repay such loans.

This means that creditors will likely need to agree to substantial deferments on interest and principal repayments. It will take time for creditor committees to form, however, and the negotiations will need to identify different options that ensure broad compatibility of treatment, including oil‑linked debt instruments and bond exchanges with different coupons and maturities.

The Trump administration will play an important role in this process. The administration’s stated goal of kickstarting Venezuela’s oil industry is dependent on a speedy debt resolution, which it can facilitate, for example, through executive orders that protect Venezuelan assets from litigating creditors. At the same time, the administration should avoid the impression that it uses its policy leverage and legal powers to help US creditors without ensuring comparable terms for foreign creditors, whether private or official.

The latter principle will be important for the position of China. Under traditional IMF rules, Beijing could until recently effectively veto a Venezuelan program by refusing to provide upfront restructuring commitments and, instead, engaging in multiyear negotiations that would leave the country in limbo while economic conditions deteriorate further. In this scenario, China would retain its secured position through oil-for-loan agreements while Venezuela remained shut out of multilateral support.

The strategic opening: Lending into Official Arrears

Fortunately, the IMF reformed its Lending into Official Arrears (LIOA) policy in April 2024 specifically to address coordination problems with large creditors in debt restructurings. The new mechanism allows the IMF to lend even as official bilateral creditors refuse to commit to restructuring—provided that the fund implements enhanced safeguards.

These safeguards are powerful: phased disbursements, program conditionality prohibiting preferential creditor payments, and quarterly reviews monitoring restructuring progress. Most importantly, once an IMF program is operational, Venezuela would be contractually bound not to provide official holdout creditors better treatment than bondholders and other creditors receive. The oil-for-loan arrangements that currently give Beijing privileged access to Venezuelan revenues would be explicitly prohibited under program terms.

As a result, China would have to choose between two options: It could participate constructively in restructuring on terms comparable to other creditors, or it could watch from the sidelines while Venezuela receives IMF support, stabilizes its economy, and implements rules preventing Chinese preferential treatment.

Should it be necessary to enact the new policy, Venezuela’s case would resonate well beyond the country itself. China is now the world’s largest bilateral creditor, but recent debt restructurings in Zambia, Sri Lanka, Ethiopia, and Ghana faced lengthy delays, with months or years passing from staff-level IMF agreement to financing assurances. The LIOA reforms were designed precisely to give the IMF leverage in such situations. Venezuela would become the highest-profile test yet of whether these reforms achieve their intended purpose.

Charting a path forward

The Trump administration’s best path forward is to pursue a sequenced strategy to achieve broad international buy-in while minimizing the potential for Chinese obstruction. To do this, the administration should:

First, clarify government recognition and lift sanctions. Acting President Delcy Rodríguez governs under a ninety-day mandate that lacks European Union recognition. Washington should work with other countries to establish a transitional framework—likely requiring elections—that provides the legitimacy necessary for IMF engagement.

Second, unlock Venezuela’s frozen special drawing rights (SDRs). The approximately five billion dollars in SDRs are Venezuela’s own reserves, not new lending. Releasing them provides immediate liquidity for stabilization and humanitarian assistance while IMF program negotiations proceed. If properly executed under international supervision, this would demonstrate US commitment to Venezuela’s economic recovery rather than merely extracting oil resources.

Third, coordinate creditor groups early. Representing major bondholders, the Venezuela Creditor Committee has already expressed willingness to negotiate a restructuring. The administration should facilitate such discussions to quickly establish realistic recovery expectations, including by discouraging holdout creditors.

Fourth, encourage Venezuela to formally request Chinese participation in restructuring on terms comparable to other creditors. When it does this, Caracas should give Beijing a four-week window to respond, as required under IMF policies. If China provides constructive commitments, then these should be incorporated into the program framework. But if China holds out, then the United States should direct its IMF executive director to support enhanced safeguards under the IMF’s LIOA policy, proceeding with program approval despite Chinese resistance.

Fifth, design robust program conditionality. Besides identifying appropriate macroeconomic policies, along with governance and other structural reforms, the IMF program should include strict caps on debt service payments to ensure comparability of treatment, prohibition of secured lending arrangements such as oil-for-loans, and transparent reporting on all creditor interactions. These safeguards would protect both IMF resources and the integrity of the restructuring process.

The strategic imperative

The Trump administration’s Venezuela intervention raised profound questions about US power projection in the post–Cold War era. Answering those questions requires more than military force—it requires strategic sophistication in wielding economic and institutional tools. An IMF program deploying the new LIOA mechanisms, if necessary, to ensure China’s active participation while delivering consensual and sustainable debt relief would offer precisely that opportunity. The question is whether Washington possesses the diplomatic patience and multilateral discipline to see it through.

The post How the IMF can help Venezuela stabilize its economy appeared first on Atlantic Council.

Executive summary

Financial-sector policymakers and financial service providers are facing both a real challenge and unique opportunity to drive economic inclusion for about three billion people and spur growth toward the Sustainable Development Goals (SDGs).

The good news from the World Bank’s Global Findex Database 2025 is that 79 percent of adults globally and 75 percent in low- and middle-income economies (LMIEs) now have a financial account of some kind. Mobile phones are even more ubiquitous, with 86 percent of adults globally and 84 percent in LMIEs having one, which in most contexts can be used to access financial services. This means about four out of every five people have the potential to save safely and borrow prudently to meet their financial needs and the potential to pay and be paid digitally. This is good news for the individuals, their families, and for these economies because, as the IMF has found,
financial inclusion serves as a catalyst for both economic participation and inclusive growth.

However, the majority of adults in LMIEs that have a financial account do not yet fully engage with the formal financial sector. Only 40 percent of adults in LMIEs (on average) saved formally and only 24 percent of adults in LMIEs (on average) borrowed from a formal financial service provider in the last year and even they do not necessarily have the type of credit they need.¹ There are, therefore, about three billion people who could actively engage in the formal financial sector, and they present both a challenge for financial sector leaders and an opportunity for accelerating inclusive growth.

The main reasons adults in LMIEs do not use formal digital financial services are affordability, lack of trust in service providers, and lack of products to meet their needs. Rapid advances in digital public infrastructure (DPI) and artificial intelligence (AI) have the potential to directly tackle these challenges. Together they can reduce costs, increase trust, and tailor products for individuals, thereby improving lives and driving growth:

• DPI has been endorsed by the Group of Twenty since India’s presidency in 2023.² Ninety-seven countries now have DPI-like digital payments; sixty-four countries have digital IDs, and 103 have data exchange—together reducing costs and increasing trust.³
• AI, by cheaply analyzing massive data sets, is turbocharging cost reduction and product tailoring, which translates into greater affordability and access for people on lower incomes.⁴

Yet, there are potentially problematic aspects to these exciting innovations. DPI has the potential for loss of data privacy (if privacy by design is not embedded), for rent extraction (if not an open-source platform), and for government surveillance (if DPI safeguards are not central).⁵ AI has the potential to turbocharge fraud, scams, and identity theft and compromise trust.⁶

Therefore, government financial-sector regulators and policymakers have urgent and important decisions to make about how to enact and enforce responsible guardrails in the financial ecosystem. These guardrails are essential so new customers have affordable, appropriate products, can trust their money and data are safe, and have effective recourse mechanisms if problems occur. National coordination at the highest level is essential, regional approaches including policy harmonization can be cost-effective, and urgency is imperative. Financial-service leaders also have key decisions to make about how to design affordable and responsible financial products that build trust, enable resilience, and foster financial well-being and economic growth. There is now a unique opportunity for financial-sector leaders to unleash economic potential for three billion people and accelerate inclusive growth.

Ruth Goodwin-Groen is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center. Goodwin-Groen brings thirty years of strategic and technical leadership in financial-sector development and financial inclusion in emerging markets to her current consulting practice, Goodwin-Groen Consulting. Her focus is on responsible digital financial inclusion and equality in financial services for women.

Goodwin-Groen is best known as the founding managing director of the United Nations-hosted Better Than Cash Alliance, which created a global movement from cash to responsible digital payments to achieve the Sustainable Development Goals. Alliance members and partners include over 113 governments, 229 companies, and most of the UN—accounting for over 90 percent of global gross domestic product.

Goodwin-Groen has a PhD in financial-sector development from the University of Bath, an MBA with distinction from Harvard Business School, and a Bachelor of Science with Honors from the University of Western Australia.

The author extends special thanks to those providing expert input on this paper: Isabelle Carboni, Expert Consultant; Eric Duflos, CGAP; Nicole Goldin, United Nations University-Centre for Policy Research & Atlantic Council; Leora Klapper, World Bank; David Porteous, Integral: Governance solutions; and Camilo Tellez-Merchan, Gates Foundation. She also deeply appreciates the input of Atlantic Council colleagues Josh Lipsky, Sophia Busch, and Juliet Lancey as well as those who contributed to the findings and recommendations of this report through their participation in two roundtable discussions at the Atlantic Council in April and October of 2025. See the Appendix for a list of the participants. This report was made possible in part by a grant from Tala.

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The post A three-billion-person challenge: The rising global market for financial leaders appeared first on Atlantic Council.

The most realistic financing option currently under consideration is a so-called reparations loan backed by frozen Russian assets. With more than $200 billion of immobilized Russian Central Bank assets currently held in Europe, this loan would be sufficient to bankroll Ukraine’s defense for the coming two years, with Russian reparations set to cover repayments. 

European officials are also mulling an alternative format that would involve a joint debt guaranteed by the EU budget. This approach would generate around $100 billion over the coming two years. However, while the reparation loan would place the financial burden on Russia, this approach would introduce new demands on the already overstretched budgets of individual EU member states. 

Using frozen Russian funds as security for a major Ukrainian loan would send a message to Moscow about Kyiv’s ability to continue defending itself for years to come. Advocates of the reparations loan see it as a justified move to make Russia pay for the invasion, but the proposal faces obstacles on both sides of the Atlantic.

The Trump administration has reportedly been working behind the scenes to obstruct the reparations loan. US officials argue that the frozen Russian assets should instead become bargaining chips during negotiations with Putin to end the war.

Belgium, which hosts the largest portion of immobilized Russian funds in Europe, remains the main obstacle. The Belgian government has complained that seizing the Russian assets will expose it to legal liabilities that could bankrupt the country. Meanwhile, Belgian Prime Minister Bart de Wever claims that Moscow has “let us know that if the assets are seized, Belgium, and me personally, will feel the effects for eternity.” 

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The debate over further funding for Ukraine comes at the precise moment when Russia’s own economic model is showing signs of fragility. Indeed, some forecasts indicate that Putin’s war economy will face mounting challenges in 2026 that could have a major impact on the Kremlin’s ability to continue the invasion. This may be a factor driving Moscow’s determination to block further EU funding for Ukraine.  

As Russian military spending reaches new highs, the Kremlin is rapidly burning through strategic reserves. At the same time, revenues from Russia’s economically crucial energy exports have recently fallen to multi-year lows amid mounting sanctions pressures and escalating long-range Ukrainian attacks on oil and gas industry infrastructure across the Russian Federation.

For now, Putin can still afford to pay his military. However, as Russia’s economic outlook worsens, he will have to prioritize the invasion of Ukraine over other state expenditures, while shifting the burden increasingly onto the Russian public. These trends do not imply imminent collapse, but they do expose a vulnerability reminiscent of the late Soviet era that Western governments could exploit in order to push the Russian dictator toward the negotiating table. 

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One of the best ways to pressure Putin is by backing Ukraine. Right now, Kyiv faces a massive funding gap for the coming year that could have serious implications for the war. Unless Ukraine can secure tens of billions of dollars in additional financing, it will be extremely difficult to pay for the military, rebuild battered energy infrastructure, and cover basic social expenditures.

Crucially, a lack of Western financial backing for Ukraine will also embolden Russia. Why should Putin consider ending the invasion when Ukraine is running out of money and Kyiv’s Western partners are showing such obvious signs of hesitation?

Europe’s reluctance to pay for Ukraine’s defense is shortsighted, to say the least. If Russia’s invasion succeeds, European governments will soon have to boost defense spending to levels that would dwarf the current cost of backing Ukraine.

A recent New York Post article highlighted the sheer scale of the likely price tag for Europe if Russia achieves victory in Ukraine. Citing research by Scandinavian think tanks, the report predicted that the expense of fortifying Europe’s eastern flank against a triumphant Russia would be approximately $1.6 trillion, or more than double the likely figure required to finance the Ukrainian war effort for four more years.

The EU’s reparations loan initiative is lawful, financially sound, and strategically necessary. By hesitating now, Western leaders risk repeating the same mistakes that shaped earlier phases of Russia’s invasion, when delayed decisions and piecemeal support only served to embolden the Kremlin and prolong the war. If European leaders are unable to act decisively on December 18, Putin will toast another strategic victory and the cost of stopping Russia will rise even further. 

Elena Davlikanova is a senior fellow with the Center for European Policy Analysis and Sahaidachny Security Center. Lesia Orobets is the founder of the Price of Freedom air defense initiative and a former member of the Ukrainian parliament.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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The post Europe’s choice: Fund Ukraine now or pay a far higher price if Russia wins appeared first on Atlantic Council.

Two weeks ago, I was in Johannesburg for South Africa’s Think20 (T20) Summit, the policy engagement group that informs the Group of Twenty (G20) leaders. The meeting came at a critical moment: the final year in a four-year cycle of Global South G20 presidencies. What I heard was a clearer, more assertive articulation of expectations—alongside pointed frustrations.

That assertiveness played out days later at the G20 Summit itself. South Africa secured adoption of the 122-point Leaders’ Declaration at the outset of the meeting, an uncommon step in G20 practice. The declaration proceeded without US endorsement but with broad support from other members. For the first G20 held in Africa, the early adoption was significant. It reflected an emerging-market cohort more willing to manage processes and shape outcomes on its own terms.

Here is what I heard on the ground in Johannesburg: 

US economic leadership remains unpredictable but indispensable

Throughout the week, I heard consistent concern about the stability and rules of the global economic order. Participants described US policy tools—from tariffs and export controls to financial sanctions—as being deployed more frequently, with shorter notice and fewer clear guardrails, creating spillovers that materially affect emerging-market stability. The T20 communiqué’s emphasis on reducing reliance on a single dominant currency, for example, reflects some of these concerns.

And yet, no one argued that the system can function without the United States. The Johannesburg declaration’s focus on adaptation finance, debt sustainability, and critical minerals still leans heavily on institutions where US support is essential. The goal is not to abandon the existing system, but to diversify risk within it and push for more transparent, rules-based, and reliable engagement from Washington.

AI as the new fault line

Sessions on artificial intelligence (AI) and the digital economy revealed a different but related imbalance. There was a shared recognition that the global AI ecosystem is highly concentrated: compute capacity, high-quality datasets, and advanced model development sit in a handful of countries and firms.

For emerging markets, this raises two concerns. First, dependence on foreign technology and infrastructure. Second, governance frameworks that were largely designed elsewhere and may not reflect their development priorities. Speakers argued that current global AI frameworks reflect advanced-economy risk profiles and regulatory debates, not the realities of countries still building basic digital infrastructure. Several participants called for open-source models, stronger regional collaboration, and domestic data-governance frameworks that better protect their interests.

AI is no longer a niche technical issue in these conversations. It is now firmly part of debates on industrialization, labor markets, and sovereignty.

A more coordinated Global South posture

The current presidency cycle has widened the G20 agenda to include development-finance reform, climate adaptation, and inclusive growth—areas emerging markets have long prioritized. Speakers emphasized that they are not simply responding to external pressures but setting agendas and building coalitions.

Africa is no longer framed as peripheral to global affairs. European participants described the continent as essential to the energy transition and supply-chain diversification. For both the United States and China, Africa has become a central arena of strategic competition. Participants argued that this attention can be turned into leverage, particularly as Africa is the center of critical-minerals supply chains.

Infrastructure and connectivity offered one of the clearest tests of this shift. Participants consistently argued that Africa needs better transport, energy, and digital links, but there was far less agreement on who should build them and on what terms. Frustration persists that many Western-backed corridors still primarily facilitate extraction and export of raw materials rather than supporting domestic industrial capacity. As one participant noted, Africa is “more connected to the global economy than to itself.” The core question was not how to supply more minerals to global markets, but how to capture more value within their own borders.

That leverage was visible in Johannesburg. The G20 Leaders’ Declaration and the new critical-minerals framework both emphasize “resilient” and “stable” critical-minerals value chains—reflecting the priorities of import-dependent economies. African officials, by contrast, used their position in those value chains to push for value addition at source and for corridors that knit together African markets under the African Continental Free Trade Area. Whether that leverage translates into concrete outcomes depends on a G20 system that is already overextended.

The leaders’ declaration also exposed a structural problem. While the G20 agenda keeps expanding, the willingness to deliver on commitments appears to be shrinking. The forum’s scope has evolved—infrastructure and critical minerals are now core macroeconomic issues, but they sit alongside debt, trade, and financial regulation on an increasingly crowded agenda, all competing for limited political capital and delivery capacity. That the declaration was adopted at all, and at the outset of the summit, sets an important precedent as the presidency rotates again in 2026. But it also raises a harder question: Can the G20 meaningfully tackle an ever-expanding list of priorities, or will it be forced to pivot to a more focused agenda?

Next up is the United States

The upcoming rotation presents an unusual opening. In its G20 presidency in 2026, the United States could lead on issues such as debt transparency, financial innovation, and energy security—areas where US interests align with broader G20 concerns about productivity and structural reform.

What stood out in Johannesburg is that, despite deepening geopolitical divisions, G20 members still face common economic challenges. Rising debt burdens, energy-security pressures, technological disruption, and climate adaptation affect all members, even as they diverge on solutions. That reality gives every major power a stake in keeping the G20 as a venue where these debates continue. Whether the G20 can maintain its relevance will depend on how those powers respond to emerging-market expectations and on whether they can still identify practical areas of coordination even as broader consensus frays.

Alisha Chhangani is an assistant director at the Atlantic Council’s GeoEconomics Center.

Note: The author’s visit to Johannesburg was sponsored by the South African T20 secretariat.

The post Dispatch from South Africa: The G20’s center of gravity continues to shift appeared first on Atlantic Council.

On the one hand, voices of doubt are rising from some negotiating groups on the ability of the Brazilian presidency and the multilateral process to deliver an ambitious package of decisions that deliver real impact, particularly on finance for adaptation for the least developed countries and small island states. But on the other hand, it is heartening that the heat and humidity of the Amazon have not slowed momentum on elevating the importance of adaptation, resilience, and the role of private finance. Holding this COP in the Amazon rainforest has sharpened the focus for many stakeholders, serving as a powerful reminder that strengthening climate adaptation will require forward-looking climate finance that includes private sector investment.

The private sector—particularly insurers, banks, asset managers, and other financial institutions—has the analytics, risk expertise, and growing appetite to engage in adaptation and resilience finance. And they are ready to work on devising the right investment vehicles to channel that much-needed finance. What they need now are strong policy signals, stable regulatory environments, and practical mechanisms from governments that can connect capital to projects.

One of the most notable developments at this year’s COP was the announcement of the National Adaptation Plans (NAP) Implementation Alliance. Led by the governments of Germany, Italy, and Brazil, as well as the United Nations Development Programme, with the support of the Atlantic Council’s Climate Resilience Center, this initiative aims to improve coherence in the complex ecosystem of financing for NAPs. Streamlining NAP financing will be critical to enable the flow of more public and private resources for climate adaptation and resilience. Over the next year, this initiative will bring together representatives from the private financial sector, multilateral development banks, civil society organizations, the public sector, and other stakeholders to find ways to improve collective action to support the implementation of NAPs.

For the private sector, this means greater visibility into future projects and greater confidence in the investment environment. For governments, it means being better equipped to design projects that meet investor expectations while delivering local resilience benefits.

The Atlantic Council’s Climate Resilience Center, along with the Natural Resources Defense Council (NRDC), will play a vital role in the alliance through Fostering Investable National Planning and Implementation for Adaptation & Resilience (FINI). Announced at a high-level session during the first week of COP30 with representatives of the governments of Australia and Switzerland, FINI is mobilizing more than one hundred actors from civil society, multilateral entities, philanthropy, and the private sector that are already advancing adaptation investments around the world.

Another remarkable development at COP30 was the announcement that fifty-three countries have committed a combined $5.5 billion to the Tropical Forest Forever Facility (TFFF). The TFFF incentivizes the conservation and expansion of tropical forests by making annual payments to tropical forest countries that maintain their standing forest. The initiative is especially notable within the climate community because of its proposed hybrid financing model. The TFFF will mix sovereign and philanthropic funding to de-risk investments on forest conservation, regenerative agriculture, and agroforestry that sustain standing forests. This, in turn, will help attract commercial capital toward these activities.

Throughout COP30, there has been a recognition that the public and private sectors cannot act alone when it comes to climate finance. The announcements and initiatives that have been launched so far at this year’s summit reflected a broad shift: the conversation is no longer about whether private finance should engage in adaptation and resilience, but how quickly financial ecosystems and policy frameworks can be aligned to deliver project pipelines to respond at the scale and speed that climate change requires.

Jorge Gastelumendi is the senior director of the Atlantic Council’s Climate Resilience Center. He formerly served as chief advisor and negotiator to the government of Peru, playing a critical role during the adoption of the Paris Agreement in the government’s dual role as president of COP20 and co-chair of the Green Climate Fund’s board.

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Then came Hurricane Melissa, the strongest Atlantic hurricane on record ever to make landfall in Jamaica. Starting late last month and into this week, it tore through the island’s central and western parishes, destroying towns, roads, hospitals, and critical infrastructure.

After days of watching the slow, relentless approach of Hurricane Melissa, one of the authors, Patricia, sheltered in her home in Kingston. She could hear the wind howling at over 100 miles per hour (mph) and rain lashing sideways against the windows—yet even that was nothing compared to the 185 mph winds and torrential rain battering the west of the country, where her friends and family live. While Patricia dealt with small leaks, her friends and family were left with nothing.

In the days after, her family visited some of the hardest-hit communities to distribute care packages, and what they saw was heartbreaking. Entire neighborhoods flattened, the landscape looking as if an atomic blast had torn through it.

At least 40 percent of the buildings and roads on the western part of the island, including Montego Bay, suffered damage. Many small communities, such as the port town Black River, were almost completely wiped out. Such damage is remarkable mostly for its sudden severity, not for its novelty. The Caribbean Community (CARICOM) countries lose an estimated 2 percent of their infrastructure capital stock annually to climate-related damage. Infrastructure upgrades must therefore be a priority, given the region’s exposure to natural disasters and climate change.

This is where US leadership can step in, not as charity, but as shared investment in resilience and regional stability. Jamaica has kept its promises: it has delivered disciplined fiscal reform, climate-smart policies, and innovation in risk financing. It has done what the international system asks of developing nations. Now, it needs that system, and its closest ally, the United States, to respond.

Reality over foresight

The Caribbean remains highly vulnerable to hurricanes and other climate-related events, which can disrupt or extend projects critical to rebuilding, driving up costs. Natural disasters often destroy essential infrastructure, forcing projects to pause or cancel. The question now is how long it will take Jamaica to recover from this cumulative destruction. The immediate response is urgent, but so too is planning for the months ahead. With projections indicating that dangerous climate events will become more frequent and severe, insurability declines and the cost of future investment rises.

The damage caused by Hurricane Melissa already amounts to almost eight billion US dollars, which is equivalent to nearly half of Jamaica’s annual GDP. That figure dwarfs the country’s much-heralded $150 million parametric catastrophe bond that it arranged with the World Bank. This bond, purchased as a form of insurance from capital markets, is designed to trigger after major disasters like this one. Given the strength of Hurricane Melissa and the scale of Jamaica’s losses, it is expected that the 2024 catastrophe bond to pay out its full $150 million value. Even so, Jamaica will need much more to rebuild.

Two sustainable paths forward

The destruction caused by Hurricane Melissa is so extensive that once the search-and-rescue efforts end and basic services such as water and electricity are restored, the damage to homes and infrastructure will exceed the capacity of any single government. Jamaica’s recovery will likely therefore depend on two important factors: innovative financing models that reduce investment risk and strong public-private partnerships that accelerate sustainable recovery.

The Caribbean’s unique and small markets call for creative financing, but there are tools readily available to help US companies invest in infrastructure and the recovery process. Two options are especially relevant.

First, US companies partnering with multilateral development banks and insurance companies can help de-risk investments. To reach the average of advanced economies by 2030, Jamaica would need significant investment, including $5.8 billion for new infrastructure and asset replacement in road infrastructure. It would also need more than $1.4 billion toward telecommunications infrastructure for fixed broadband and 4G networks to reach equivalent levels in developed economies. This significant need offers opportunities large enough to attract major investment. Limited human and institutional capacity make collaboration with third-party institutions even more important. Projects such as the Inter-American Development Bank’s One Caribbean program can help prepare projects, strengthen public-private partnerships, and manage political risk. Equally important is building trust with local partners. Many Caribbean firms are family-owned and community-rooted, which makes relationship-building essential for lasting investment. Joining local business organizations such as American Chamber of Commerce chapters and participating in trade missions can help US investors understand regulations, identify talent, and ensure that projects succeed over time.

Second, public-private partnerships can help the Jamaican government and their partners meet urgent recovery needs while driving long-term, sustainable efforts. Launching public-private partnerships is one of the most effective ways to mobilize capital from local, regional, and private investors. Under these partnerships, governments provide needed guarantees and subsidies to reduce risk, while the private sector generates the capital needed to determine a project’s commercial viability.

It is important that this model is used, as opposed to wholesale private ownership of foreign operators, to avoid eroding projects’ national economic value. Therefore, local equity participation should be prioritized in public-private partnership structures to maximize national benefits and ensure long-term sustainability. The private sector can work with governments and local civil society to strengthen resilience through environmental and social impact assessments. It can also support by improving infrastructure standards, including for underground piping and the usage of hurricane-proof glass, as well as updating building codes where necessary. Insurance can also help keep infrastructure projects afloat during delays and stoppages resulting from natural disasters. At the same time, new investments will need to focus on renewable energy, resilient infrastructure, digital connectivity, and community housing, all sectors where US expertise and capital can make an immediate impact.

Hurricane Melissa tested Jamaica’s strength and found it unbreakable but not inexhaustible. The island has proven that fiscal responsibility is possible. Now it’s time for the United States to prove that climate solidarity is, too.

Patricia R. Francis, who currently resides in Jamaica, is a nonresident senior fellow for the Caribbean Initiative at the Adrienne Arsht Latin America Center, Atlantic Council.

Maite Gonzalez Latorre is a program assistant at the Adrienne Arsht Latin America Center, Atlantic Council.

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The chart below shows an estimate of how much ODA could be lost from the 2023 baseline, if Group of Seven (G7) countries go through with their promised funding cuts.

Major providers of ODA have announced cuts to aid spending for 2025 and beyond. 2024 marked the first time that the United States, the United Kingdom (UK), France, and Germany have all cut aid at the same time in nearly thirty years. As a result, the Organization for Economic Co-operation and Development estimates that ODA decreased by 9 percent in 2024 and could fall by as much as 17 percent in 2025.

Meanwhile, the current US administration has endorsed an approach to development investment that is more geopolitical and transactional. To achieve its strategic goals, the United States should seek to reform or empower domestic development finance institutions (DFIs), instead of abandoning the framework entirely. Washington has existing development agencies and expertise that have helped to deliver economic gains globally and would lend themselves to facilitating and implementing new investment. Specifically, blended finance is instrumental in fulfilling bilateral deals to secure critical supply chains or promote US industry abroad.

Funding cuts aren’t the only trend affecting development finance

Pulling back funding from traditional donors has been the main driver of recent declines in ODA. With growth slowing down and shrinking fiscal spaces, donor countries are reprioritizing their spending priorities. Across the board, there have been reductions in contributions to international organizations, lower levels of humanitarian aid, and reduced spending on hosting refugees in donor countries.

For example, the chart above captures the changes in a few key countries. The United States dismantled USAID in January, cutting billions of dollars of global aid overnight. France and Germany have also decreased aid budgets and placed a series of existing programs under review. In the UK, Prime Minister Keir Starmer intends to decrease the foreign aid budget from the current rate of 0.5 percent of gross national income to 0.3 percent by 2027, citing the need to increase defense spending.

In October, the Atlantic Council hosted the president of the European Investment Bank (EIB), Nadia Calvino, and she reiterated the EIB’s commitment to financing climate transition, furthering gender equality, and assisting with Europe’s defense build-up. While she shared the important continuities in the EIB’s mission, she also highlighted that the development finance landscape has been changing for years now.

Retrenchment from traditional donors is just one trend in the evolution of global development policy. The DFIs have been adapting to fewer large-scale infrastructure loans, increased involvement from the private sector, and the emergence of “middle-power” lenders—namely China. In recent years, traditional lenders have also prioritized geopolitical interests when making decisions about development finance. 

Geopolitical interests shouldn’t supersede effective development principles

Major ODA providers have increasingly started to look at development finance through the lens of strategic competition and move from aid to investment. The proliferation of China’s Belt and Road Initiative helped to spur political will in the United States and G7 allies for the Global Gateway Initiative and the Partnership for Global Infrastructure and Investment (PGII). BRICS countries have created their own new development finance institutions, such as the New Development Bank. At the Atlantic Council GeoEconomics Center, our experts wrote about a framework for positive economic statecraft in 2023 and have continued to work on how this could be operationalized to meld development goals with national security.

However, the current US administration has leaned away from the principles of effective development aid. Its “America First” policy reframes foreign assistance as more transactional, focusing on trade and bilateral investments and taking a step back from issues such as climate transition and poverty reduction. The US-Ukraine Reconstruction Investment Fund, commonly referred to as the US-Ukraine critical minerals deal, is reminiscent of the resource-for-infrastructure deals that China popularized in Africa, which received extreme criticism for their extractive nature. The $40 billion in support for Argentina marks an unprecedented, unilateral move by the United States. When the IMF provides bailouts, the programs include certain stipulations for improving economic stability. US support to Argentina seems to, instead, be contingent on President Javier Milei’s party staying in power. These US policies should prompt a reckoning from other actors about how geopolitics can or should fit into the development sphere.

Donor countries benefit from continuing effective development assistance. More stable economic environments globally facilitate sustainable investment deals in infrastructure and more. G7 initiatives, such as the Global Gateway or PGII, can’t compete with China in terms of lending volume, but they offer a value proposition of rigorous impact evaluation and development best practices to help countries avoid debt traps and maintain long-term financing. In the October editions of the World Economic Outlook and the Global Financial Stability Report, issues such as climate change or gender equality were barely mentioned, but these remain important considerations to achieve sustainable and equitable global development.

The United States should seek to meld strategic investment objectives with long-term development goals to achieve sustainable changes in the global economy. Blended finance represents an entry point for the administration to leverage existing agencies to achieve strategic goals.

Blended finance can be leveraged to deliver on strategic investment promises

Public-private partnerships—or blended finance—have become a popular area of interest for delivering critical public infrastructure. The World Bank estimates that the infrastructure funding gap is around $1.5 trillion annually, and the use of private capital is crucial to address this gap so that countries can optimize already scarce public funds.

Blended finance helps to crowd private capital into development projects by mitigating investment risk. This strategy is not without its pitfalls. But given the immense development financing need and shrinking ODA, blended finance is a critical tool for creating funding opportunities. DFIs can help coordinate investment instruments and mechanisms, such as risk guarantees, project insurance, syndicated loans, or equity instruments, which have proven especially useful in emerging technologies and when promoting first movers. In the past, the United States and G7 allies have successfully leveraged public-private partnerships to compete with Chinese lending and to further both strategic and development goals, such as with the Lobito Corridor.

If the current administration is serious about using foreign investment to benefit US industry and secure critical supply chains, it should reengage more with existing US development agencies, such as the US International Development Finance Corporation (DFC), the Millennium Challenge Corporation, and the US Export-Import Bank. Considering the immense coordination challenges of implementing strategic development projects, the administration would benefit from properly supporting these organizations to help realize investment in more challenging countries.

By empowering the DFC, for example, the United States could utilize existing capacity for private sector engagement to fulfill bilateral promises for new investments. DFC reauthorization has been included as an amendment in the National Defense Authorization Act for 2026, which was passed through the Senate last month. This reauthorization process should be seen an opportunity to reform the DFC so that it is equipped to actually implement deals, such as the US-Ukraine Reconstruction Investment Fund.

Given the United States’ massive budget deficit, the Trump administration’s approach to strategic development investment cannot succeed without the effective coordination of private capital to funnel money into sustainable projects. And infrastructure projects that align with national development agendas are more sustainable in the long run for host countries and investors.

The world is undergoing a period of great changes in the global economic order, and development finance is a part of this puzzle. As the current Trump administration seeks to reshape the global trading system, development institutions are also finding their footing in this era of competitive geoeconomics. In the process, it is important to remember that effective development agendas have helped to lift billions of people out of poverty. The United States shouldn’t forsake its track record of development assistance when existing tools can be leveraged for current strategic interests.

Jessie Yin is an assistant director at the Atlantic Council’s GeoEconomics Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Despite spiraling global debt, US-generated trade frictions, and stubborn inflationary pressures, global growth has held up far better than most feared when the same group met in April. The IMF this week raised its 2025 global growth forecast to 3.2 percent, up from 2.8 percent in April, as the world economy thus far has shrugged off worst-case scenarios of runaway tariffs and cascading financial shocks.

Yet that relief comes with an anxious edge: Momentary stability seems less durable in a world threatening to break into fragments, as global trade growth of 2.4 percent (and declining) is running behind overall global growth figures—a departure from long-running trends that many economists reckon is unsustainable.

The crisp autumn air in Washington this week has been thick with “what-ifs?” 

• What if we are only seeing a temporary reprieve before tariff-driven inflation and slowdowns bite harder? 
• What if the tariff war escalates with China, with Beijing having announced sweeping new export controls on rare earths and President Donald Trump threatening to instate a 100 percent tariff on Chinese goods?
• What if mounting public and private debt, now above 235 percent of global gross domestic product, becomes a debt shock as growth stumbles and interest payments rise—hitting emerging markets and poorer nations hardest?
• What if monetary tightening, inflation pressures, and fiscal fatigue ultimately undermine economic expansion? 
• What if trade fragmentation—regionally oriented supply chains, eroding global trading systems—confounds conventional models and results in everyone growing more slowly?

The IMF itself warned that markets may be underestimating risks tied to tariffs, debt, and financial vulnerabilities. “Buckle up: Uncertainty is the new normal, and it is here to stay,” said Kristalina Georgieva, managing director of the IMF, in her keynote speech ahead of the annual meetings. “Before anyone heaves a big sigh of relief, please hear this: Global resilience has not yet been fully tested.”

In particular, she pointed to that reliable harbinger of global uncertainty: surging global demand for gold. “Spurred by valuation effects and net purchases—partly reflecting geopolitical factors—holdings of monetary gold now exceed one-fifth of the world’s official reserves,” she said.

To be sure, Trump administration officials don’t have a lot of patience for those wringing their hands about potential economic dangers. They see US growth as stronger than expected (and a product of their policies), they regard global growth as resilient, and they see that tariffs have proven far less inflationary than doomsayers predicted. With most global policymakers balancing between relief and anxiety, count Trump officials more as triumphant.

On the other side stand European and other global financial leaders who see economic tensions building and believe that debt, China, tariffs, artificial intelligence (AI) uncertainties—or some toxic mix of all that—could bring about a tipping point. European Investment Bank (EIB) President Nadia Calviño goes even further, saying this week at the Atlantic Council that she has “the impression that the rest of the world is moving on” from reliance on US decisions, especially on issues such as trade and climate. “There’s a very strong commitment to the multilateral framework, very strong determination to pursue win-win partnerships around the world.” The EIB’s own survey shows that Trump tariffs are slowing down investments, but that the pain is being felt more by US companies than European ones, “which are proving to be quite resilient for the moment.” 

Few conversations this week didn’t either begin or land on AI as an accelerant both of economic growth and fragility. But you would have been disappointed if you were listening for great new ideas about how best to regulate, shape market structures, and ensure the technological dividends of AI spread beyond the United States, China, and a handful of other locations where AI is entering the business bloodstream most rapidly.

Georgieva spoke about how most countries lack regulatory, ethical, or labor frameworks to cope with rapid AI diffusion. Many central bank governors and finance ministers agreed that AI, and the fourth industrial revolution it represents, could have as large an impact on the sources of global growth and employment as did the first industrial revolution, which moved so much of humanity from farmlands to factories. 

Beginning roughly in 1760, the Industrial Revolution was a period that moved the world to more widespread, efficient, and stable manufacturing processes. New knowledge and innovation resulted in vast economic growth, as economic historian Joel Mokyr, who won the 2025 Nobel economics prize on Monday, and others have documented and examined. This revolution also accelerated political change, giving birth to communism, fueling modern capitalism, and creating the economic and social conditions that were the context for two world wars and the Cold War that followed. The economic, political, and societal impact of AI will be no less—and just as uncertain in its impacts on everything from economic competition to the future of war.

The Atlantic Council’s GeoEconomics Center was created for just this kind of period, working alongside more than a dozen of our centers with the conviction that one can’t separate macroeconomic forces from national security impacts. In that spirit, the Council brought together seventy meetings in Washington this week—convening dozens of central bank governors and finance ministers.

That IMF-World Bank crowd will leave town this weekend with uncertainty about what the world will look like when they return in the spring. What’s clear is that they, particularly Trump administration officials, have agency in either building upon the scenarios that have brought momentary relief or further contributing to global anxieties.

By the close of this week’s meetings, the prevailing sentiment settled on something like this: We’ve been luckier than expected, but luck isn’t a sustainable policy response. Delegates’ cautious optimism was tempered by their knowledge that an external shock or a series of policy missteps could tilt the balance rapidly. I heard more than one voice describe this moment as the calm before a storm, or a lull before a calamity, depending on the actions of world leaders in the weeks ahead. 

Georgieva listed several reasons the world economy has withstood strains from multiple shocks thus far: Improved policy fundamentals have cushioned against shocks. The private sector has adapted as trading conditions have changed. Tariff hits turned out to be less than initially feared, as most countries avoided tit-for-tat trade wars with the United States. And supportive financial conditions, including attractive interest rates, have provided added resilience. What’s unclear is how long these advantages can last. 

Over the next six months, what I’ll be watching is whether big AI investment bets pay off, whether trade tensions turn worse, whether debt cracks deepen, and whether markets can sustain equity valuations equal to the internet bullishness of twenty-five years ago. I’ll also want to know whether leaders can find a sufficient sense of common cause to steer us through any trouble.

This week’s consensus was that business as usual is over—due to factors ranging from Trump’s tariffs and AI to global economic fragmentation and geopolitical conflict. There also was a rough consensus that if the world is to reach a new equilibrium and avoid a major crisis, then it would require the full attention of policymakers and international institutions to manage a fast-changing and increasingly fractured world. 

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

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Today’s global financial architecture was designed in 1944 at the Bretton Woods conference, which looked to rebuild postwar Europe. But there was no African representation there. Today, the global financial system struggles to meet the needs of a continent that is home to 1.5 billion people—nearly a fifth of the world’s population. African countries still face high borrowing costs, debt distress, and limited fiscal space.

But now, policy forums are looking to reform the financial system to ensure that it works for African countries. One such forum is the Group of Twenty (G20) International Financial Architecture Working Group (IFAWG), a technical working group of the G20’s Finance Track, which focuses on monetary, fiscal, and economic issues. I am participating in the group today in my capacity as an advisor at the African Development Bank. Here’s my analysis on the policy discussions we’re having this year in the IFAWG and why they matter for Africa.

Inside IFAWG

IFAWG was established following the 2008 global financial crisis and is mandated to promote stability in the international financial system. Initially focused on issues including capital flow volatility and crisis prevention, its role has since expanded dramatically. Today, the working group is the G20’s central venue for discussions on sovereign debt and debt sustainability, cost of capital, reforms of multilateral development banks (MDBs), and strengthening the global financial safety net.

The group submits its deliverables to the G20 Finance Ministers and Central Bank Governors Meetings, and such deliverables ultimately form part of the negotiated G20 communiqué. That’s why African representation in these working groups is so important. These groups are fora where policies are shaped before receiving endorsement at the ministerial level.

This shaping—of both policy and conversation—has increasingly been conducted by African voices, particularly during South Africa’s G20 presidency this year. South Africa chose “Solidarity, Equality, Sustainability” as the theme of its presidency, and it has set priorities intended to align with the development needs of the African continent and the Global South. Within IFAWG, such priorities include strengthening MDBs, mobilizing development finance, addressing sovereign debt sustainability and liquidity challenges, reforming the global financial safety net, and enhancing capital flows to emerging markets and developing economies.

Strengthening MDBs and unlocking capital

IFAWG is focusing on strengthening MDBs, as implementing reforms will be particularly important for unlocking much-needed capital at scale. But the MDB-reform agenda has already been underway for some time. It began under Italy’s 2021 G20 presidency, when Italy initiated a review of capital adequacy frameworks, which help banks pinpoint the capital needed to support their assets, liabilities, and risks. By conducting the review, the G20 was looking to boost MDB lending capacity to respond to global challenges. The subsequent Indonesian, Indian, and Brazilian G20 presidencies have built on this work, with Brazil’s presidency specifically devising a roadmap for reforms to enable such banks to better address regional and global challenges—and ultimately help countries achieve their development objectives.

IFAWG, under the South African presidency, has focused its MDB work on a monitoring and reporting framework to track the implementation of these recommendations. Africa’s role in shaping this conversation is crucial for designing financial innovations geared toward the continent’s wants and priorities. For example, to boost MDB lending, the African Development Bank and Inter-American Development Bank worked together on a joint proposal to use special drawing rights (or SDRs, global reserve assets maintained by the International Monetary Fund) as hybrid capital. In practice, this proposal would allow advanced economies to channel unused SDRs to the African Development Bank or Inter-American Development Bank, while still counting them as reserves. Subsequently, both banks could then leverage these SDRs to raise more financing on markets, multiplying their impact and providing long-term, low-cost resources for development.

On a broader scale, the G20 at a ministerial level is catching up to the conversations about strengthening MDBs and unlocking capital. This can be seen in G20 support, as expressed in recent communiqués, for the seventeenth replenishment of the African Development Fund—the concessional financing window of the African Development Bank Group, which provides grants and low-interest loans to Africa’s lowest-income countries.

Addressing debt sustainability

IFAWG is paying particular attention to fixing the debt architecture because of the urgency of doing so. African countries, on average, pay a roughly 300-basis-point risk premium on what they borrow from international financial markets, unlike even similarly rated peers. Interest payments alone consume 18 percent of government revenues on average. These are resources diverted from health and education systems, as well as infrastructure projects. Under these circumstances, many African nations find themselves at high risk of debt distress.

The G20’s Common Framework for Debt Treatment, launched under the Saudi Arabian presidency in 2020, was meant to provide a structured and coordinated approach to sovereign debt restructuring for eligible low-income countries. Four African countries—Chad, Zambia, Ghana, and Ethiopia—have entered the framework, each navigating complex restructurings with mixed outcomes. Although the framework received much attention for being bold, its execution has drawn criticism for lack of clarity, predictability, and speed.

In response, IFAWG is working to improve transparency and consistency. African voices have played an active role in pushing for predictability, speed, and transparency. Senior government officials are advocating for faster and more transparent debt-resolution processes, more predictable timelines, a fair participation of all creditors, to name a few issues.

Therefore, Africa is not merely affected by these reforms. It is actively shaping them. The continent is proactively engaging in technical debates and, in so doing, is producing foundational shifts on issues ranging from strengthening multilateral development banks to debt restructuring and reducing the cost of capital. As the G20 Leaders Summit nears, Africa’s voice is no longer on the margins; it is at the heart of global financial reform. IFAWG’s work is proof of that.

Sijh Diagne is an advisor to the vice president of finance and chief financial officer of the African Development Bank Group. He participates as a representative of the African Development Bank at the G20 International Financial Architecture Working Group meetings. He previously served as senior advisor to the minister of economy, planning, and cooperation of Senegal and as G20 deputy representing the African Union during Senegal’s African Union chairmanship in 2022.

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

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Georgieva’s warning came as the global economy continued to prove resilient against global shocks ranging from the United States’ tariff-rate changes to an artificial-intelligence investment boom that many believe is a bubble at risk of bursting. And while the global economy has done better than many feared, risks still linger. As Georgieva put it: “Uncertainty is the new normal, and it is here to stay.” An example of that played out just days before the annual meetings, when US President Donald Trump threatened to impose 100 percent tariffs on Chinese goods, but backtracked shortly after.

We sent our experts to the IMF and World Bank headquarters to sort through all the uncertainty and glean a sense of what may lie ahead for the global economy—and what policymakers should do about it. Below are their insights, in addition to highlights from our own conversations with economic leaders about how they plan to navigate tumultuous times.

This week’s expert contributors

October 17 | 5:42 PM ET

The world must be open and honest about the benefits of the Bretton Woods system

We’ve come to the end of another IMF World Bank Week at the Atlantic Council, concluding seventy events here. We’ve started with the beginning at the IMF on all the themes coming into these meetings, and it’s so different than what we were with when we first came here six months ago, ten days after Liberation Day. I wanted to take a moment, as we sit here and reflect back on everything we heard from the finance ministers, the central bank governors, our analysts, our experts, our team, and try to take it in and understand what’s happened.

Because in the day-to-day flow of IMF WEO reports and upgrades and downgrades and inflation and back and forth on Argentina and everything that’s flying on US and China and the trade wars and rare earths, I think we’re losing sight of what’s actually happening in the global economy. It’s the difference between an earthquake and a series of fractures. Six months ago, at the spring meetings, was an earthquake. US President Donald Trump shook the global economy with Liberation Day, and the question facing these ministers, these governors, and the people they represent was whether the global economy would ever be the same, and whether we were going back to a pre-Bretton Woods system, a time where these institutions didn’t exist.

And then six months passed, and Liberation Day tariffs paused, and some came back and some didn’t and some deals were struck, and so we came into these meetings, these annual meetings, with everyone mistakenly breathing a sigh of relief because they thought that things had changed and reverted to status quo.

But think about where we are. The effective tariff rate in the United States is 17 percent. It started at 2.5 percent in January. We got back to the Liberation Day level, but we got there slowly. So each of these things that’s happened over the past six months, what’s happened on tariffs, what’s happened on central bank independence, growing debt problems (we’re in a government shutdown here in Washington), all of them are fractures.

No single one is an earthquake, but in totality, it adds up to the same thing. And the difference of how these ministers reacted this week versus six months ago is night and day because they want, understandably, for things to be as they were and no one wants to speak the hard truths that things are changing fundamentally. They are not going back to the way things were, and everyone has to confront that openly and honestly, because if we don’t speak those hard truths, they are going to rear their heads in a painful way, one way or the other.

The crunch points are coming. A year from now, we’ll be in Thailand. The IMF will have to revisit its quota process, and there’s no room for compromise right now between the United States, Europe, India, China, and the world’s other large economies. The issues are building around the world, not just on trade and tariffs: on debt, on AI, on job loss, all of these issues are what the ministers talk about quietly and privately but don’t want to address openly because there are no good answers. There’s no good explanations for how the global economy has shifted, but there is a fundamental truth that is hard to reconcile with.

Henry Morgenthau, when he addressed the Brent Woods conference at the opening of that conference in 1944, said we have to be partners, not bargainers. But let’s face it, the United States wants to bargain and deal with every other country in the world bilaterally, and that is not why these institutions were created in the first place. They were created on the premise that if we operated collaboratively, not bilaterally but multilaterally, we would deliver better results for the people in our own countries and the world.

And we all know that that system was imperfect over eight years, but if we break down to a simple bargaining premise of might-makes-right economic leverage over one country can be exercised, we might not like what we find back in the United States. That was the lesson this week with China and its rare earth decision. Opening this up will have cost, and there’s a reason the system was built in the first place.

I think the rest of the world has to be open and honest about the benefits of that system. No one seems to want to defend it. Everyone wants to say what’s wrong about it, and there certainly are things that are wrong. No one wants to say that multilateralism is a good thing, that international cooperation is a good thing, that not bullying your friends and allies is a good thing, but these are truths.

These are truths we’ve always known in this country—that central bank independence is a good thing and leads to more prosperity. This is fundamental to what makes a strong economy and what makes a healthy society. And we cannot separate out, as the ministers and governors would like to do, our geopolitics and our economic policy. There are National Guard troops outside this building all week. You don’t hear that anywhere in this building throughout the week. We have a government shutdown. We have a situation going on around the world. We have flare-ups all over, but those are not issues the ministers want to confront because it’s not core to what they see as the immediate objective, which is stability, but stability for stability’s sake, while technology is changing rapidly and the shifts are happening all around us, will ultimately lead to instability.

So our work here, our goal at the Atlantic Council, is to tell the hard truths that are sometimes difficult to tell. This is the role of these institutions, and we will play a constructive role in doing it.

The one thing about macroeconomics and data is that the numbers usually don’t lie. Now, there’s questions about that, and we’ve debated some of them here, but we need to put the data out there and let the facts speak for themselves. We need to be transparent about our economies. We need to show what’s actually happening around the world, and only then can we have an honest conversation about the tectonic shifts that are happening in the global economy and how every country has to adapt to this new reality and stand by their values and stand by the process and stand by the system that has led to the prosperity that has brought us to this prolonged period of global peace unseen any time before in history.

October 17 | 4:26 PM ET

Unease, uncertainty, and a struggle for direction

This year’s IMF-World Bank Annual Meetings reflected profound unease about a shifting global economic order and uncertainty over the roles of the two multilateral institutions.

Discussions took place amid continuing trade tensions and a stark divergence in the direction of the world’s major economies.

The United States is placing its chips on the rapid buildup of artificial intelligence (AI) and digital finance, with AI-driven capital investment now overshadowing slowing activity in other sectors. China continues to rely on manufacturing exports, masking weaknesses in the domestic economy. European growth is recovering slowly while it faces the dual challenge of maintaining its open-market model and financing a defense buildup in response to Russian aggression. Meanwhile, public debt keeps increasing, and concerns about government bond markets is creating a bit of unrest in financial markets.

Delegates from smaller countries surely used the meetings to point to the resulting spillovers. Apart from the general exhortations to mutual cooperation, however, there were no tangible takeaways in the concluding documents coming out of the meetings.

A US call to get back to basics

Yet, delegates walked away with one bit of clarity. After dreading a possible US withdrawal during the spring meetings, delegates now got a clearer idea of the priorities of the Bretton Woods institutions’ major shareholder. Treasury Secretary Scott Bessent repeated his pointed call for the IMF and World Bank to return to their core mandates: that is, helping countries strengthen their private sector growth and maintain macroeconomic and financial stability.

The World Bank translated this impetus into an elegant shift toward a “jobs, jobs, jobs” agenda, refocusing its existing private sector work to deliver more immediate benefits for developing countries. The IMF, by contrast, looked as though it lacked a clear north star—guarded in tone, generic in its advice, and preoccupied with avoiding friction with major shareholders. In the face of “Knightian uncertainty,” even its highly valued World Economic Outlook forecasts have a shorter half-life than usual.

A risky bet on Argentina

And there was Argentina, of course, an evergreen topic for annual meeting conversations. The unprecedented US intervention in favor of the Argentine peso carries exceptional risks, both for the reputation of the US Treasury and the IMF, which could be asked to discreetly provide the funds for Argentina to repay the United States and, less discreetly, may get stuck with the blame for a failed adjustment program in the first place. Much is therefore at stake in Argentina’s midterm elections, which may or may not deliver the intended boost for the president’s reform program.

What comes next

For the World Bank, success will rest on the successful execution of its jobs agenda. It may find partners in the developing world more willing to engage this time. Zambia’s President Hakainde Hichilema, for example, neatly summed up how his country hopes to boost domestic activity in the face of declining foreign aid. “Seek ye [own] growth” is his mantra, an effort which the World Bank will no doubt gladly assist.

On the IMF’s side, discussions on quota and governance reform remain gridlocked, with major shareholders seemingly uninterested in meaningful changes. However, the forthcoming Article IV consultations with the United States and China will be a chance for the institution to redeem its reputation as a credible and impartial assessor of its members’ economic policies and their spillovers.

And by the annual meetings in Thailand next year, the then-completed surveillance and conditionality reviews will provide a clearer picture of how the institution will reinterpret the mandate of its core activities—economic surveillance and program lending.

October 17 | 1:52 PM ET

Megan Greene: It could be time to ‘slow down’ the Bank of England’s rate-cutting cycle

October 17 | 1:31 PM ET

Concerns over debt dominate the annual meetings once again—but this time, it’s major economies keeping officials up at night

It should come as no surprise that debt is dominating the conversations at this week’s annual meetings. The IMF has been clear in raising the alarms around the current dangerous trajectory, with global public debt set to hit 100 percent of global gross domestic product (GDP) before the end of the decade. 

Reining in unsustainable debt-to-GDP ratios is always a key piece of IMF surveillance work and countries use this convening in Washington to show the Fund—and private investors—why their markets are stronger than they might appear on paper. But what’s different this time around is which part of the economy is causing the most concern. It’s not the typical emerging markets that are keeping the IMF up at night. In the Fiscal Monitor it released this week, the IMF flagged Italy, France, Canada, and of course, the United States as having rising debt risk and warned that this financial turmoil (perhaps exacerbated by political dysfunction in some countries) could spiral into a “doom loop.” 

The interesting thing to me is how often I heard a similar concern raised privately by emerging market finance ministers and central bank governors. In the series of meetings we held this week, debt came up again and again, with these countries’ officials concerned about the United States and Europe. It’s a strange and concerning twist on the usual way debt plays out through the IMF and World Bank meetings, and perhaps a signal of what finance officials fear could end up being a problem which, like the global financial crisis, starts in advanced economies but doesn’t end there.

October 17 | 12:28 PM ET

The World Bank’s Christine Qiang on AI infrastructure

Frank Willey, assistant director at the Global Energy Center, speaks with Christine Qiang, the World Bank’s director of digital foundations, about how the World Bank and other international financial institutions support the global adoption of artificial intelligence.

October 17 | 11:01 AM ET

A grim picture for global public debt, but the IMF and World Bank are here to help

It used to be a running joke that the IMF stands for “It’s Mostly Fiscal.” And indeed, before the global economy was hit by a series of major shocks, that was the case—the IMF placed strong emphasis on its fiscal policy advice.

This year’s annual meetings are bringing that focus back. The IMF’s latest Fiscal Monitor, released on Wednesday, presents a sobering picture: global public debt is expected to reach 100 percent of global GDP—the highest level since 1948, when the world was rebuilding after the devastation of World War II.

Today, 3.4 billion people—about 40 percent of the world’s population—live in countries where governments spend more on debt servicing (interest payments) than on either education or healthcare. The main drivers of rising government expenditures are increased defense spending, aging populations, and high borrowing costs.

With scarce resources, spending efficiency becomes critical. Governments must rethink how to use public money smarter—through enhanced public finance management, strong debt management frameworks, credible medium-term fiscal rules, and greater transparency. As always, both the IMF, through its capacity development and Article IV policy advice, and the World Bank, through its development assistance, stand ready to help. Policymakers should make full use of these tools and focus on achieving fiscal sustainability for this and future generations.

After all, no one wants to live in a world where interest payments occupy the top line of the national budget.

October 17 | 10:54 AM ET

The World Bank’s Boubacar Bocoum on value creation for local industries

Alexis Harmon, assistant director at the Global Energy Center, is joined by Boubacar Bocoum, lead mining specialist at the World Bank.

October 17 | 10:49 AM ET

Turkish Central Bank Governor Fatih Karahan warns that the digital lira should be designed carefully—or else risk financial stability

October 17 | 9:03 AM ET

What lies ahead on day five of the IMF-World Bank annual meetings

October 17 | 7:00 AM ET

Dispatch from Washington: Is this the calm before the economic storm?

When the world’s finance ministers and central bank governors roll into town for the annual meetings of the International Monetary Fund (IMF) and the World Bank, it’s a good time to take the measure of the global economic mood. The best way to view this week’s gathering is through a split screen of relief and anxiety. 

Despite spiraling global debt, US-generated trade frictions, and stubborn inflationary pressures, global growth has held up far better than most feared when the same group met in April. The IMF this week raised its 2025 global growth forecast to 3.2 percent, up from 2.8 percent in April, as the world economy thus far has shrugged off worst-case scenarios of runaway tariffs and cascading financial shocks.

Yet that relief comes with an anxious edge: Momentary stability seems less durable in a world threatening to break into fragments, as global trade growth of 2.4 percent (and declining) is running behind overall global growth figures—a departure from long-running trends that many economists reckon is unsustainable.

The crisp autumn air in Washington this week has been thick with “what-ifs?” 

• What if we are only seeing a temporary reprieve before tariff-driven inflation and slowdowns bite harder? 
• What if the tariff war escalates with China, with Beijing having announced sweeping new export controls on rare earths and President Donald Trump threatening to instate a 100 percent tariff on Chinese goods?
• What if mounting public and private debt, now above 235 percent of global gross domestic product, becomes a debt shock as growth stumbles and interest payments rise—hitting emerging markets and poorer nations hardest?
• What if monetary tightening, inflation pressures, and fiscal fatigue ultimately undermine economic expansion? 
• What if trade fragmentation—regionally oriented supply chains, eroding global trading systems—confounds conventional models and results in everyone growing more slowly?

The IMF itself warned that markets may be underestimating risks tied to tariffs, debt, and financial vulnerabilities. “Buckle up: Uncertainty is the new normal, and it is here to stay,” said Kristalina Georgieva, managing director of the IMF, in her keynote speech ahead of the annual meetings. “Before anyone heaves a big sigh of relief, please hear this: Global resilience has not yet been fully tested.”

Read more

Inflection Points

Oct 17, 2025

Dispatch from Washington: Is this the calm before the economic storm?

By Frederick Kempe

At the IMF-World Bank annual meetings, cautious optimism about the global economy was tempered by what could come next.

Economy & Business International Financial Institutions

EBRD President Odile Renaud-Basso on private capital mobilization in Ukraine

Finance leaders’ word of the week: Jobs

The World Bank’s Lisa Finneran on encouraging and scaling innovation

Visa’s Todd Fox on how fragmentation is impacting payments innovation

Ukrainian Finance Minister Serhiy Marchenko on the future of the IMF’s lending to Kyiv

‘The rest of the world is moving on’ after US strikes at multilateral order, says European Investment Bank’s Nadia Calviño

IFC Director of Research Paolo Mauro on venture capital in emerging economies

Economy and Trade Minister Amer Bisat: ‘There’s just not going to be prosperity without the sovereignty of the state’

The IMF’s message is clear: The time to prepare for AI adoption is now

Commerzbank’s Verena Bitter on trends in transatlantic investment

Pakistan’s finance minister on his country’s devastating flooding—and the government’s reforms in response to it

What to expect on day four of the IMF-World Bank meetings

Read day three analysis

October 16 | 6:15 PM ET

EBRD President Odile Renaud-Basso on private capital mobilization in Ukraine

European Bank for Reconstruction and Development (EBRD) Odile Renaud-Basso speaks with Nicole Goldin, head of equitable development at the UNU-Centre for Policy Research and a senior fellow at GeoEconomics Center, about the EBRD’s investments in Ukraine’s economy and the current state of private capital mobilization.

October 16 | 5:52 PM ET

Finance leaders’ word of the week: Jobs

We’re nearly through IMF-World Bank week, and it is at this point when our experts usually begin to mark the divide between the conversations happening at the World Bank and the International Monetary Fund. But this week, for economist Nicole Goldin, it’s not the differences that are striking—it’s one major similarity.

“The World Bank is making a can’t-miss reorientation around jobs, but they are not alone in that,” Nicole tells me. “The IMF managing director and her colleagues are also talking jobs.” 

So why would the IMF want to join the World Bank in ensuring that people everywhere have (and take) employment opportunities? Nicole, who previously delved into jobs data, policy, and strategy as a World Bank lead economist, shares one reason: Heavy debt, and paying the mounting costs associated with it, “is one of the biggest challenges to macroeconomic stability,” Nicole tells me. “One policy prescription we hear from the IMF is generating domestic revenues. Jobs are critical to this, to expanding the tax base.” 

Another reason: AI has the potential to make the financial system more efficient and generate between 0.1 percent and 0.8 percent in global economic growth, as Georgieva noted this morning. But Nicole points out that “countries need the right talent and a technologically skilled workforce to capitalize on new industries and seize digital dividends from deploying AI.” 

The third reason is particularly relevant at a time when youth protests are leading to the ousting of leaders around the world: “Without economic opportunity, lost ambition and aspiration can fuel conflict and fragility and destabilize markets.” 

October 16 | 5:30 PM ET

The World Bank’s Lisa Finneran on encouraging and scaling innovation

The Global Energy Center’s Ken Berlin speaks with Lisa Finneran, director of innovation at the World Bank about the Bank’s initiatives with governments around the world aimed at driving private-sector innovation.

October 16 | 4:25 PM ET

Visa’s Todd Fox on how fragmentation is impacting payments innovation

Todd Fox, the president of Visa’s Economic Empowerment Institute, joins Atlantic Council Assistant Director Alisha Chhangani to discuss the impact of regulatory fragmentation on digital finance at the Atlantic Council’s World Bank content hub.

October 16 | 3:31 PM ET

Ukrainian Finance Minister Serhiy Marchenko on the future of the IMF’s lending to Kyiv

October 16 | 12:00 PM ET

‘The rest of the world is moving on’ after US strikes at multilateral order, says European Investment Bank’s Nadia Calviño

October 16 | 11:54 AM ET

IFC Director of Research Paolo Mauro on venture capital in emerging economies

Charles Lichfield, director of economic foresight and analysis at the GeoEconomics Center, speaks with Paolo Mauro, director of the International Finance Corporation’s (IFC) Economic and Market Research Department about the IFC’s priorities and recent trends in venture capital in emerging markets.

October 16 | 11:29 AM ET

Economy and Trade Minister Amer Bisat: ‘There’s just not going to be prosperity without the sovereignty of the state’

October 16 | 11:11 AM ET

The IMF’s message is clear: The time to prepare for AI adoption is now

Per IMF research, around 30 percent of jobs in advanced economies will be negatively affected by artificial intelligence (AI)—meaning potential income or job losses. Policy leaders must get ready for what’s coming, and the sooner they start preparing, the better. 

Yesterday, I moderated an IMF-World Bank Week panel tackling this issue, where I spoke with two IMF officials, Era Dabla-Norris, the deputy director of the Fiscal Affairs Department and Giovanni Melina, deputy division chief of the structural and climate policy division in the Research Department. 

Our conversation explored the risks and opportunities stemming from the rapid rise of AI. If implemented correctly, AI could boost global economic growth by 0.1 to 1.5 percent. But there will be both winners and losers. 

The IMF has made preparing for these shifts a top priority. To put things in perspective: in the latest World Economic Outlook, the word AI appears more than thirty times, while climate appears only seventeen times. In its AI Preparedness Index, the IMF assesses 170 countries on their readiness for AI adoption—benchmarking them across categories such as human capital, digital infrastructure, and energy supply. 

Most importantly, the IMF is here to help with policy advice. Its message is clear—the time to act is now. Governments must start rethinking unemployment benefits, adjusting taxation to encourage job augmentation rather than automation, and reskilling their labor forces. There’s a lot to be done—but if your country wants to stay ahead in the AI race, there’s no better time to start than today.

October 16 | 10:50 AM ET

Commerzbank’s Verena Bitter on trends in transatlantic investment

Charles Lichfield, the GeoEconomics Center’s director of economic foresight and analysis, talks with US Representative for Commerzbank Verena Bitter about the transatlantic investment climate.

October 16 | 10:43 AM ET

Pakistan’s finance minister on his country’s devastating flooding—and the government’s reforms in response to it

October 16 | 9:03 AM ET

What to expect on day four of the IMF-World Bank meetings

The ‘torn umbrella’ problem for developing countries in debt

The next phase in Argentina’s recovery—and the US role in it

The World Bank’s Luis Benveniste on education and the labor market

Spain’s Carlos Cuerpo responds to Trump’s tariff threats over NATO spending: ‘We’re making good on our commitments’

Behind the scenes with the Atlantic Council at the World Bank during the annual meetings

Mastercard’s Dimitrios Dosis on digital infrastructure and inclusive growth

The World Bank’s Manuela Francisco on turning economic analysis into outcomes

The World Bank’s Lisandro Martín on the upcoming Jobs Indicator

The overlooked views of developing countries

Ireland’s Paschal Donohoe on why his neutral country is ramping up its defense spending

A number worth thinking about this wek: 3.4 billion

How the World Economic Outlook sets the tone for today’s IMF-World Bank meetings

Read day two analysis

October 15 | 7:28 PM ET

The ‘torn umbrella’ problem for developing countries in debt

For the size of the problem that is sovereign debt, the response from the global community always seems to be not enough. 

Today, the IMF convened the Global Sovereign Debt Roundtable, and this week, it has been adamant about the roundtable’s role in addressing the plight of heavily indebted developing countries. It’s an issue that has risen to the top of the international agenda since I left the IMF, just before the COVID-19 pandemic.  

But the patchwork effort to help the most indebted countries is flawed, and we’re seeing why in the opening days of these Annual Meetings. The all-important first chapter of the IMF World Economic Outlook only genuflects toward the Group of Twenty Common Framework for debt restructuring (which has consistently amounted to less than promised) and the Global Sovereign Debt Roundtable, which is supposed to address the rules of the road for creditors. The Global Financial Stability Report also says little about the issue, although it does discuss how Eurobonds. issued by so-called frontier economies—those nations that before the pandemic were making progress toward emerging market status—now are expected to offer yields of over 10 percent.  

Behind closed doors, the verdict on the international community’s commitment to low-income country debt is decidedly negative. At a roundtable I took part in yesterday, I heard considerable skepticism about both the debt restructuring process and the Global Sovereign Debt Roundtable consultations. As my colleague Nicole Goldin pointed out, developing countries spent $1.4 trillion on debt service payments last year. Countries that together represent over half the population send more money to creditors than they spend on their own people’s health, education, and other needs. Officials worry that a global slowdown or unexpected shocks could send many countries into default. 

For low-income countries, the approach seems like a torn umbrella: It will help in a light rain, but in a storm, it will be useless. 

October 15 | 5:14 PM ET

The next phase in Argentina’s recovery—and the US role in it

The Atlantic Council hosted Argentina’s delegation to the annual meetings for an hour-long discussion of the country’s economic policies. Economy Minister Luis Caputo and Central Bank President Santiago Bausili took stock of Argentina’s efforts to normalize fiscal and monetary policies, a process that was successfully pursued over the past two years, resulting in a primary fiscal surplus and a significantly improved central bank balance sheet.

They expressed confidence that the exchange rate would continue to depreciate normally within the widening band while inflation was on a gradually declining path. They also characterized US support as instrumental in stabilizing foreign exchange markets ahead of the midterm elections later this month. Details on such support are close to being finalized, and the central bank president emphasized that there would be a close link to the IMF’s current program framework with Argentina.

Caputo explained that the Milei administration’s expectations for the midterms remain conservative, focused on winning more than a third of seats in either house of Argentina’s Congress. This would be sufficient to sustain a presidential veto of legislation that is not in line with the administration’s policy goals. The lack of an absolute majority has not been an obstacle to new reforms in the past, and the minister was confident that the reform momentum would continue. 

Caputo also reported a significant increase in US companies’ interest in investing in Argentina, especially in the mining and energy sectors. OpenAI is also reported to be weighing a $25-billion investment in Argentina, potentially providing a major growth impulse to the still sluggish economy.

October 15 | 3:29 PM ET

The World Bank’s Luis Benveniste on education and the labor market

Nour Dabboussi, associate director of the Atlantic Council’s MENA Futures Lab, is joined by World Bank Global Director of Education Luis Benveniste for his take on education reforms, the future of the labor market, and the role of the private sector.

October 15 | 2:46 PM ET

Spain’s Carlos Cuerpo responds to Trump’s tariff threats over NATO spending: ‘We’re making good on our commitments’

October 15 | 12:20 PM ET

Behind the scenes with the Atlantic Council at the World Bank during the annual meetings

Juliet Lancy, a young global professional at the GeoEconomics Center, gives a tour of the Atlantic Council’s pop-up studio, where it records and broadcasts events and interviews during the IMF-World Bank annual meetings.

October 15 | 11:38 AM ET

Mastercard’s Dimitrios Dosis on digital infrastructure and inclusive growth

Alisha Chhangani, an assistant director at the GeoEconomics Center, speaks with Dimitrios Dosis, president for Eastern Europe, Middle East, and Africa at Mastercard, about the potential for digital infrastructure to drive inclusive growth.

October 15 | 11:10 AM ET

The World Bank’s Manuela Francisco on turning economic analysis into outcomes

Bart Piasecki, an assistant director at the GeoEconomics Center, talks with Manuela Francisco, global director of economic policy at the World Bank, about the Bank’s Country Growth and Jobs Report.

October 15 | 11:07 AM ET

The World Bank’s Lisandro Martín on the upcoming Jobs Indicator

Lize de Kruijf, a program assistant at the GeoEconomics Center’s Economic Statecraft Initiative, speaks with World Bank Department of Outcomes Director Lisandro Martín on the Bank’s upcoming Jobs Indicator. 

October 15 | 11:04 AM ET

The overlooked views of developing countries

One of the perpetually overlooked events of the Annual Meetings is the gathering of finance ministers and central bank governors from emerging market and developing economies known as the Intergovernmental Group of Twenty-Four, or G24. Unlike its Group of Twenty (G20) counterpart, which brings together the world’s largest economies, the G24 serves as a voice for smaller countries—one that normally isn’t heard as the meetings proceed. In my twenty-plus years in the IMF Communications Department, the twice-yearly G24 press conferences were normally treated as an afterthought in planning, and mainstream media rarely gives attention to its communiques.

Which is too bad, because the G24 statement usually contains a plain-spoken summary of the issues that are on the front burner for countries that represent a vast swath of the world’s population. If the watchwords of these annual meetings are “uncertainty” and “opportunity,” the G24 only has room for the former. The communique issued yesterday highlights “humanitarian suffering,” “trade tensions,” “high debt burdens and rising debt-servicing costs” and the continuing need for “climate action.” (In the all-important first chapter of the World Economic Outlook, whose publication yesterday overshadowed the G24, climate change is relegated to the final paragraph.)

Underlying it all is concern about falling exports and declining foreign-exchange earnings, all of which add up to “constrained” growth, “magnifying risks” to macroeconomic stability, and a bleaker medium-term outlook. With development assistance from the advanced economies declining, the G24 offers up a proposal for the IMF to “consider exploring a mechanism for the regular issuance of Special Drawing Rights (SDRs) to better support” developing countries. The IMF tried that after the COVID-19 pandemic, but most of the SDRs ended up in the coffers of the largest economies. The idea of an SDR issuance to low-income countries was also discussed at yesterday’s IMF Week seminar on “a global response to sovereign debt pressures and climate change.” It remains to be seen whether the views of the G24 will resonate as the powerhouse economies of the Bretton Woods institutions settle in for their deliberations this week—or whether the group will remain a voice in the wilderness.

October 15 | 11:00 AM ET

Ireland’s Paschal Donohoe on why his neutral country is ramping up its defense spending

October 15 | 9:58 AM ET

A number worth thinking about this week: 3.4 billion

The IMF-World Bank Annual Meetings are officially in full swing, and if there’s a topic on everyone’s mind, it’s debt. The topic of climate change, on the other hand, is on many minds, but it isn’t making its way into many conversations this week—one exception being a conversation I led yesterday, in partnership with the Heinrich Böll Foundation and SOAS University of London.  

These topics are top of mind for good reason. I, like most economists, like to go “by the numbers,” so here is one number that shows why many of us in Foggy Bottom are thinking about debt and climate change: 3.4 billion.

That figure represents nearly half the world’s population. It’s also the number of people living in developing countries whose governments spend more on their debt service than they do on health or education, according to a report released this year by the United Nations Conference on Trade and Development (UNCTAD).

This same figure is also the midpoint of the estimated range (3.2-3.6 billion) of the number of people living in areas disproportionately experiencing the effects of climate change, including rising sea levels and weather events such as extreme heat, droughts, and floods.

The implications are staggering. In 2024, developing countries spent $1.4 trillion in debt service payments. The money spent servicing debt is money that cannot be spent investing in people and prosperity: not only in health and education, but also in infrastructure, energy, technology, and the services needed for economic growth and equitable development. Combined with dwindling official development assistance and reduced trade and foreign direct investment, developing countries—including some of the most vulnerable to climate change—lack the fiscal space to invest in mitigation, adaptation, or resilience.

Debt dynamics and other financial trends factor prominently in today’s World Economic Outlook and Global Financial Stability Report and they will spark discussion (case in point: check out our discussion yesterday “decoding” the reports only hours after they launched). They are certainly worthy of all the talk, but it is important not to lose sight of the human toll—the ultimate costs to the lives and livelihoods of 3.4 billion people that must be urgently addressed.

October 15 | 9:36 AM ET

How the World Economic Outlook sets the tone for today’s IMF-World Bank meetings

Good numbers, but a gloomy forecast, for the global economy

Saudi Finance Minister Mohammed Aljadaan sounds the alarm on the world’s ‘very serious’ debt challenge

What to know about the World Bank’s new AgriConnect initiative

Europe may be losing momentum for realizing the single market, says Irish Central Bank Governor Gabriel Makhlouf

What Trump 1.0 trade negotiators think about the second administration’s tariff strategy

US-China trade spat moves supply chains to top of mind

What to expect at today’s IMF-World Bank meetings

Read day one analysis

October 14 | 6:47 PM ET

Good numbers, but a gloomy forecast, for the global economy

Today, the International Monetary Fund released its highly anticipated World Economic Outlook (affectionately abbreviated “WEO”). And as I tuned in to the launch from IMF headquarters, I noticed a glaring contrast between the report’s upgrade to global growth forecasts and its overall gloomy tone, reflected in the headline: “Global Economy in Flux, Prospects Remain Dim.” 

Our top numbers cruncher, Hung Tran, tells me that’s kind of the point. Hung worked at the IMF for six years, during which he had a hand in these kinds of reports. The IMF is trying to tell us, he says, that the economy is faring “better than feared,” but “worse than what we need.” 

On the positive side, Hung points to upgraded economic growth estimates for countries such as the United States, India, and China. This is due in part, he adds, to the world’s relative restraint from deploying retaliatory tariffs against the United States. 

But on the grimmer side, Hung notes that the WEO lists a number of “downside risks,” from a “possible slowdown in the AI boom” to “high public debt” to “pressure on central banks,” which could destabilize financial markets. But “the WEO emphasizes the importance of policy and policy cooperation,” without getting to the roots of the problem, Hung says: “US protectionism and Chinese mercantilism.” That, he says, is what is “squeezing many countries in the rest of the world.” 

“To say that we need good policies and cooperation is not a solution,” Hung warns. 

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October 14 | 4:23 PM ET

Saudi Finance Minister Mohammed Aljadaan sounds the alarm on the world’s ‘very serious’ debt challenge

October 14 | 12:35 PM ET

What to know about the World Bank’s new AgriConnect initiative

Charles Lichfield, director of economic foresight and analysis at the Atlantic Council’s GeoEconomics Center, outlines the three most important things to know about AgriConnect, a new initiative from the World Bank as the institution aims to pivot to its “new north star”: creating jobs.

October 14 | 12:26 PM ET

Europe may be losing momentum for realizing the single market, says Irish Central Bank Governor Gabriel Makhlouf

October 14 | 10:39 AM ET

What Trump 1.0 trade negotiators think about the second administration’s tariff strategy

OCTOBER 14 | 10:30 AM ET

US-China trade spat moves supply chains to top of mind

The IMF-World Bank Annual Meetings have kicked off following another rupture in the US-China trade relationship after Beijing’s tightened export restrictions on rare earth elements (REE) last Thursday. As one of the most important trade relationships in the world enters a new period of uncertainty, expect supply-chain management to now play a bigger role than ever.

China’s announcement strikes at the heart of US dependence on REE supply chains: China controls around 70 percent of rare earth extraction, 90 percent of refining, and 93 percent of magnet production (which uses rare earths) worldwide.

As of December this year, companies will be required to secure permission before exporting any product with more than 0.1 percent of its value attributable to a rare earth originating in China. In effect, the policy extends Beijing’s control of the supply chain much further downstream, reflecting a mechanism the United States has previously used to control chip exports—even companies manufacturing and selling products outside of China would theoretically need authorization if the product’s REE content falls above the designated value. A ban on the export of any rare earths to foreign militaries further complicates the supply-chain picture; for example, it is unclear whether a company such as Boeing or General Motors—both of which produce goods for the defense sector—are counted as such. These restrictions are also not specifically designated against the United States, giving China the latitude to use its REE export dominance against other countries should it deem necessary.

To date, the Trump administration has been aggressive in attempting to manage wider risks associated with China’s supply-chain dominance. The administration has consistently worked to secure non-Chinese sources of REE including resource development opportunities in negotiations with Ukraine, the Democratic Republic of Congo, and Greenland. This summer’s major deal (led by the Department of Defense) with MP Materials represents another effort to improve domestic supply-chain resilience. Yet bringing these opportunities online at scale takes time, and as a result, REE have been an important lever in trade negotiations with China. Case in point: A framework agreement toward a US-China trade deal this past June included a drawdown in REE export restrictions that China had announced over the past several months.

That’s possibly why Thursday’s announcement had been met with such an aggressive White House response, in the form of a proposed 100 percent retaliatory tariff on China and talk of canceling a meeting between US President Donald Trump and Chinese President Xi Jinping. And while Trump has walked back his threats, the exchange still largely resets trade negotiations back to where they were earlier this year, with supply chains caught in the middle.

There are two observations from these latest flare-ups that will be of use to the officials descending upon Foggy Bottom this week, some wanting to talk trade on the sidelines of the annual meetings. First, it is clear that risks to global supply chains are entering a new phase. While China’s Ministry of Commerce aimed to clarify the scope of these new restrictions on Sunday, whether (or how) China will enforce these new and powerful tools is still unclear. China’s willingness to use such tools will continue to be hard to ignore, even if wider trade tensions cool. Second, Washington’s pursuit of alternative sources for REEs now bears even more urgency—and opportunity. Though China dominates REE supply chains, REEs themselves aren’t necessarily rare. But accessing them and integrating them into the economy requires thoughtful and precise supply-chain partnerships. Other countries may find that their own REE resources can help enhance their trade negotiations with the United States on the basis of alternative supply-chain development. It will take time for alternative resources to alleviate the US dependency on China, but the need to reduce China’s REE dominance, its leverage in trade negotiations, and its risk to US national security will weigh increasingly heavy as the US administration continues to work to address its trade-balance concerns.

October 14 | 9:02 AM ET

What to expect at today’s IMF-World Bank meetings

Why you won’t hear enough about the Gaza peace plan at IMF-World Bank week

Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors

As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court

Jobs and AI to dominate the IMF-World Bank Annual Meetings

The five important issues at the IMF-World Bank Annual Meetings

OCTOBER 13 | 5:30 PM ET

Why you won’t hear enough about the Gaza peace plan at IMF-World Bank week

The IMF-World Bank Annual Meetings kicked off today, on the same day that US President Donald Trump visited Israel to mark the implementation of phase one of his Gaza peace plan.

On the surface, the two events seem completely disconnected, but anyone who has been part of international finance over the past two years knows the opposite is true.

On October 8, 2023, I landed alongside my Atlantic Council colleagues in Marrakesh for that year’s IMF-World Bank Annual Meetings. Throughout the airport, our hotel, and the conference venue, television news played the horrific images of October 7 on loop, and the world’s finance ministers and central bank governors were asked for their thoughts on the unfolding war. They largely demurred, arguing that it was too early to tell if there would be any economic repercussions. I criticized that response at the time.

Fast forward to the 2024 spring meetings. Two days before the meetings began, Iran launched hundreds of drones and missiles toward Israel. The markets reacted sharply, and the risk of a wider war trickled into every conversation. But the threat passed, markets rebounded, and the world’s finance ministers went back to business.

Now, here we are again. Financial leaders will discuss tariffs, debt, a US government shutdown, the growth of artificial intelligence, the future of the dollar, the bailout in Argentina, and more. But the one thing they likely won’t talk about is the cease-fire in Gaza.

Economists have been trained for decades to separate the worlds of macroeconomics and geopolitics, despite time and again being reminded that’s not how the world works. Just look back to Russia’s invasion of Ukraine, which triggered the most sweeping sanctions response in history.

Events over the past few years remind us why the Bretton Woods institutions were created in the midst of World War II: to deliver economic prosperity in the hopes of fostering peace. But in recent decades, the world’s financial leaders have focused solely on the prosperity part (with mixed results) and have sometimes forgotten the larger goal.

To continue to earn the trust of the member countries they serve, these institutions must remember their roots. 

OCTOBER 13 | 11:15 AM ET

Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors

Once again, the International Monetary Fund (IMF) and World Bank Annual Meetings will unfold against a turbulent global backdrop. In their speeches and prepared statements, delegates will raise concerns about the global economic outlook, fret about rising fiscal deficits and hidden risks in private equity and crypto markets, and make the case for their own policy efforts in front of the global community. A joint communiqué is unlikely, in part because both the United States and China will not agree to language aimed at reining in their isolationist or mercantilist tendencies for the benefit of the rest of the world.

But this is not what observers should focus on most this week. Instead, it’s worth closely watching for a hint of what is happening behind closed doors. There, conversations will focus on the few areas for which the two institutions still enjoy the support of their major shareholders—not the least because the IMF’s and World Bank’s considerable financial resources look ever more appealing to finance ministers who are running out of fiscal space at home.

The United States and the IMF

To begin with, most delegations will be keenly interested in Washington’s relationship with the Bretton Woods twins. US Treasury Secretary Scott Bessent signaled support for the institutions at the spring meetings this year, recently firmed up by the US intervention in the Argentine peso. But while policymakers may talk of partnership, the power asymmetry within the IMF remains evident.

There is a possible upside to greater US engagement—including improved cooperation on major lending cases and a push for the IMF to strengthen its surveillance arm, a core mandate much neglected in recent years. Similarly, the United States could collaborate with the two Bretton Woods institutions to ensure that countries meet their loan conditions, enabling timely repayment. The administration might even convince Congress to ratify the 2023 quota increase, shifting the fund’s finances to a more permanent capital base.

But there is also a risk. Already reeling from the dissolution of the US Agency for International Development, many delegates are bracing for US demands to cut climate and, perhaps, development programs at the IMF and World Bank, which could lead to substantial friction with emerging market and developing countries. Moreover, there are concerns that the United States could politicize both lenders’ loan operations, exposing all shareholders to the risks of misconstrued lending programs.

Read more

Econographics

Oct 13, 2025

Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors

By Martin Mühleisen

Behind closed doors, delegates are likely to tackle questions around Washington’s relationship with the IMF, China’s economic performance, and the role of the Bretton Woods institutions.

China Financial Regulation

OCTOBER 12 | 4:36 PM ET

As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court

The big question in Washington this weekend, following the latest exchange in the US-China trade war: What went wrong?

On Thursday, China announced sweeping new export controls on rare earths, and the following day, US President Donald Trump threatened to reinstate 100 percent tariffs on Chinese goods (on top of existing tariffs) and cancel his long-awaited meeting with Chinese President Xi Jinping.

That flurry of action came after a quiet summer, during which the world’s two largest economies put their trade war on hold and Trump said increasingly nice things about Xi. Just three weeks ago, the two leaders had what Trump called a “very productive” phone call, agreeing to finally meet face-to-face in South Korea at the end of October.

Then, on September 29, the US Department of Commerce issued the so-called “affiliates rule,” which—as an interim final rule—went into effect immediately, without full notice and comment. It placed export controls on thousands of foreign companies that are 50 percent owned or controlled by listed entities. Even though the rule doesn’t mention China, Chinese companies are on the lists, so the measure directly affects them.

Beijing viewed the move as a violation of the spirit of Geneva, where US Treasury Secretary Scott Bessent and his counterpart, He Lifeng, brokered a temporary truce in May. So on Thursday, China added five new elements to its rare-earth licensing regime. Remember, this is the same authority that caused supply shortages at Ford factories in Michigan in June—and arguably pushed Trump and Xi to the negotiating table in the first place.

Trump, of course, reached for his favorite tool in response: tariffs. And now, many are watching to see whether Asian markets dip on Monday into what could be their biggest drawdown in months. Trump, perhaps wary of the market reaction, posted on Truth Social on Sunday, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment.”

But there’s something I think analysts are missing in all of this: the Supreme Court.

Read more

New Atlanticist

Oct 12, 2025

As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court

By Josh Lipsky

The US president’s leverage with Xi Jinping could be undercut by the Supreme Court’s deliberations.

China Trade and tariffs

OCTOBER 10 | 9:28 AM ET

Jobs and AI to dominate the IMF-World Bank Annual Meetings

The GeoEconomics Center’s Sophia Busch and Bart Piasecki outline what to expect at the 2025 IMF-World Bank Annual Meetings.

OCTOBER 8 | 2:28 PM ET

The five important issues at the IMF-World Bank Annual Meetings

The International Monetary Fund (IMF) and World Bank are gearing up for their annual meetings next week. Amid increasingly high stakes, this year’s gathering has special significance, seeing as the United States, after having withdrawn from several other international organizations and agreements, still remains active in the two Bretton Woods institutions.

At these annual meetings, the IMF and the World Bank will face five important issues, which span both near-term economic prospects and more fundamental, longer-term challenges confronting the global economy.

1. Navigating growth—and inflation

Recent data show a rather resilient global economy, particularly in the United States. Despite concerns about rising tariffs and ongoing uncertainty, economic activity has held up since the second quarter of the year—so much so that 2025 gross domestic product (GDP) growth estimates have been recently revised upward, to 3.2 percent globally (according to the Organisation for Economic Co-operation and Development) and 2.5 percent for the United States (according to Goldman Sachs). Stock markets have also performed well, with the MSCI World Index posting a 14.3 percent return year-to-date, roughly matching the S&P 500’s 14.4 percent, though a price-to-earnings ratio of thirty (compared to a long-term average of nineteen) suggests the market valuation could be stretched. Global inflation has slowed noticeably, from 5.67 percent in 2024 to an estimated 4.29 percent this year. In the United States, the consumer price index growth rate fell from 3 percent in January to 2.3 percent in April, before rebounding to 2.9 percent in August.

But this resilience may not last. Evidence suggests that the good performance of the global economy and stock markets has been narrowly based, driven by a handful of high-tech corporations (the so-called Magnificent Seven) pouring money into artificial intelligence (AI) hardware, software, and data centers. In fact, according to JP Morgan Asset Management, AI-related capital expenditures have accounted for 1.1 percent of the 1.6 percent GDP growth in the first half of 2025. Such intensive investment could prove unsustainable, and a slowdown could ripple through the broader economy and stock markets. Meanwhile, US importers are likely beginning to pass more of the costs of tariffs onto retail customers, driving up consumer prices. If new tariffs keep coming, that would sustain the inflation process going forward.

It is up to the IMF to present a convincing analysis of the economy’s vulnerability to concentration risk (dependence on AI related activities) and the likely delayed effects of rising tariffs, which boost the likelihood of mild stagflation in the near future, especially in the United States; it is also up to the Fund to advise countries to adopt policies to mitigate this risk. This could be a challenge, especially when major economies can point to decent economic performance so far this year and may feel complacent.

Read more

Econographics

Oct 8, 2025

From US tariffs to Argentina’s crisis: The five important issues at next week’s IMF-World Bank Annual Meetings

By Hung Tran

The IMF and the World Bank will face five important issues, which span both near-term economic prospects and more fundamental, longer-term challenges confronting the global economy.

Argentina Financial Regulation

The post Behind the scenes of the IMF-World Bank Annual Meetings as leaders adjust to a new normal of uncertainty appeared first on Atlantic Council.

But this is not what observers should focus on most this week. Instead, it’s worth closely watching for a hint of what is happening behind closed doors. There, conversations will focus on the few areas for which the two institutions still enjoy the support of their major shareholders—not the least because the IMF’s and World Bank’s considerable financial resources look ever more appealing to finance ministers who are running out of fiscal space at home.

The United States and the IMF

To begin with, most delegations will be keenly interested in Washington’s relationship with the Bretton Woods twins. US Treasury Secretary Scott Bessent signaled support for the institutions at the spring meetings this year, recently firmed up by the US intervention in the Argentine peso. But while policymakers may talk of partnership, the power asymmetry within the IMF remains evident.

There is a possible upside to greater US engagement—including improved cooperation on major lending cases and a push for the IMF to strengthen its surveillance arm, a core mandate much neglected in recent years. Similarly, the United States could collaborate with the two Bretton Woods institutions to ensure that countries meet their loan conditions, enabling timely repayment. The administration might even convince Congress to ratify the 2023 quota increase, shifting the fund’s finances to a more permanent capital base.

But there is also a risk. Already reeling from the dissolution of the US Agency for International Development, many delegates are bracing for US demands to cut climate and, perhaps, development programs at the IMF and World Bank, which could lead to substantial friction with emerging market and developing countries. Moreover, there are concerns that the United States could politicize both lenders’ loan operations, exposing all shareholders to the risks of misconstrued lending programs.

China’s position in the IMF

It will also be interesting to see how China’s position vis-à-vis the Bretton Woods institutions is evolving. The IMF has begun to take a firmer line on China by pointing at a significant exchange rate depreciation ahead of the annual meetings, and it has also published a paper on the hidden costs of China’s industrial policies. This introduces some overdue realism to the IMF’s analysis, but the question is how China will react if it senses a major shift in the previously benign analytical work of the institution.

Beijing is unlikely to complain about this openly, but its frustration with stalled governance reform—including a freeze on quota shares, limiting China’s voting power—will continue to simmer beneath the surface. It may feel vindicated by further building up its alternative lending framework (consisting of project loans and renminbi swap lines), and it may take a hard line on debtor countries with dollar or euro obligations. Both institutions will need to resort to skillful shareholder diplomacy while preserving their analytical integrity.

Lending to Argentina and Ukraine

IMF shareholders may also be concerned about recent developments in Argentina. The government is caught between a possible resurgence of inflation and weak growth prospects, as long as the ruling coalition lacks a strong congressional majority. In the case of political dysfunction, Argentina may eventually fail to service its growing multilateral and US debt burden, which could complicate the IMF’s position as a senior creditor if worse comes to worst.

Ukraine represents a different but equally complex test. Even as military support continues, the budgetary gap into next year is becoming more visible. Continuing the lending program will require additional financing assurances, a discussion that is linked to the legally fraught use of frozen Russian assets. Otherwise, the countries that formed the Group of Creditors to Ukraine in 2023 to facilitate the program may eventually be on the hook for additional contributions to help Ukraine repay the IMF.

Internal dynamics and reform

And then there is the question of internal reform. Both institutions face staff and budget pressures but are under renewed scrutiny to deliver measurable results in an era of rising skepticism toward multilateralism. The World Bank has already announced a reorganization of some functions across its different lending arms, and the IMF, whose staff has grown over the last five years, will likely come under pressure to unwind the recent buildup in non-core functions.

To sum up, expect few major announcements this week. There will be important closed-door meetings, however, that are likely to set the course for the Bretton Woods institutions for the next few years.

Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former IMF official with decades of experience in crisis management and financial diplomacy.

The post Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors appeared first on Atlantic Council.

At these annual meetings, the IMF and the World Bank will face five important issues, which span both near-term economic prospects and more fundamental, longer-term challenges confronting the global economy.

1. Navigating growth—and inflation

Recent data show a rather resilient global economy, particularly in the United States. Despite concerns about rising tariffs and ongoing uncertainty, economic activity has held up since the second quarter of the year—so much so that 2025 gross domestic product (GDP) growth estimates have been recently revised upward, to 3.2 percent globally (according to the Organisation for Economic Co-operation and Development) and 2.5 percent for the United States (according to Goldman Sachs). Stock markets have also performed well, with the MSCI World Index posting a 14.3 percent return year-to-date, roughly matching the S&P 500’s 14.4 percent, though a price-to-earnings ratio of thirty (compared to a long-term average of nineteen) suggests the market valuation could be stretched. Global inflation has slowed noticeably, from 5.67 percent in 2024 to an estimated 4.29 percent this year. In the United States, the consumer price index growth rate fell from 3 percent in January to 2.3 percent in April, before rebounding to 2.9 percent in August.

But this resilience may not last. Evidence suggests that the good performance of the global economy and stock markets has been narrowly based, driven by a handful of high-tech corporations (the so-called Magnificent Seven) pouring money into artificial intelligence (AI) hardware, software, and data centers. In fact, according to JP Morgan Asset Management, AI-related capital expenditures have accounted for 1.1 percent of the 1.6 percent GDP growth in the first half of 2025. Such intensive investment could prove unsustainable, and a slowdown could ripple through the broader economy and stock markets. Meanwhile, US importers are likely beginning to pass more of the costs of tariffs onto retail customers, driving up consumer prices. If new tariffs keep coming, that would sustain the inflation process going forward.

It is up to the IMF to present a convincing analysis of the economy’s vulnerability to concentration risk (dependence on AI related activities) and the likely delayed effects of rising tariffs, which boost the likelihood of mild stagflation in the near future, especially in the United States; it is also up to the Fund to advise countries to adopt policies to mitigate this risk. This could be a challenge, especially when major economies can point to decent economic performance so far this year and may feel complacent.

2. Managing the “dual shock”

Many countries are currently grappling with a “dual shock”: rising US tariffs on one hand and China exporting its industrial overcapacity on the other. In response to declining shipments to the United States, China has redirected exports to third countries, which is set to boost its overall trade surplus to a record $1.2 trillion this year. Put simply, after helping to hollow out the US manufacturing base, Beijing is now starting to do the same to other economies—including Europe and emerging markets that rely on a manufacturing-for-export growth model. These countries are increasingly squeezed by US protectionism and Chinese mercantilism.

How will the IMF guide its members? Will it encourage a “back to basics” approach, based on mutually beneficial policies that reduce external and fiscal deficits, promote free and largely balanced trade, and create growth opportunities for developing countries? Or will it focus on designing second-best solutions—in response to the problems that its two largest member states are creating?

3. Doubling down or easing off on Argentina?

In a scene of déjà vu, the IMF is once again dealing with Argentina’s socioeconomic crisis—shortly after the institution approved its twenty-third assistance package to the struggling nation in April. The twenty-billion-dollar loan comes on top of the $43 billion that Argentina still owes, making the country the largest lending risk exposure of the IMF. President Javier Milei has managed to turn a 5 percent fiscal deficit in 2023 into a 0.3 percent surplus in 2024, and he has reduced annual inflation from nearly 300 percent in early 2024 to under 40 percent today. Argentina’s GDP growth is projected to reach 5.5 percent this year. Yet, Milei’s coalition just suffered a major defeat in an election in Buenos Aires ahead of the midterm polls in late October, shaking investor confidence and triggering a sudden run on the peso, which remains overvalued when adjusted for inflation.

It is not clear how the IMF will deal with the unfolding currency crisis. Will it change its conditionality on the Argentina program to make it more socially and politically sustainable? Or will it double down on the current program, especially given the United States’ promise of a twenty-billion-dollar currency swap line to support Argentina?

4. Dealing with the US administration’s agenda

In line with the Trump administration’s call to the IMF and World Bank to focus on their core missions, the institutions have toned down references to their activities regarding climate change, gender equality, inclusive growth, and sustainable development. It’s unclear, however, whether that will satisfy the United States—or whether Washington will push for even greater compliance with its agenda. 

A key question is how the World Bank will respond to US pressure to “graduate” middle-income countries from World Bank borrowing and end lending to China altogether. It also remains to be seen how Daniel Katz, recently approved by the IMF Executive Board to be first deputy managing director, will navigate his new role. Katz, who served as chief of staff to US Treasury Secretary Scott Bessent, has argued that the United States should work to limit China’s role at the IMF and the World Bank—a stance that closely mirrors the administration’s position.

5. Improving the sovereign debt restructuring process

Finally, the IMF and the World Bank have an opportunity to improve the sovereign debt restructuring process. Building on progress in the Global Sovereign Debt Roundtable, the IMF and World Bank should encourage parallel negotiations between debtor countries and their creditors—both official and private lenders—rather than sequential talks. Acting as an honest broker and providing necessary information to both negotiating groups, the IMF could help reduce delays and facilitate timely and fair restructuring agreements.

Participants and observers will closely follow this year’s annual meetings, including these five important issues. Doing so will help them better understand how the United States will continue to interact with other countries in the multilateral setting of the Bretton Woods institutions.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a senior fellow at the Policy Center for the New South, a former executive managing director at the Institute of International Finance, and a former deputy director at the International Monetary Fund.

The post From US tariffs to Argentina’s crisis: The five important issues at next week’s IMF-World Bank Annual Meetings appeared first on Atlantic Council.

Since the start of Trump’s second term, the US dollar has depreciated by roughly 12 percent against a broad basket of currencies, including many across Africa. For African economies that borrow and trade in dollars, a weaker greenback eases debt burdens and lowers import costs. In this way, a weaker dollar provides these African countries with unexpected breathing room in an otherwise difficult global financial environment.

Why do African countries rely so heavily on the US dollar?

Challenges around public debt in Africa are not a recent development, but a structural feature of the continent’s political economy. For several decades, many African governments have faced persistent difficulties in mobilizing sufficient domestic capital to meet rising expenditure demands. These constraints stem largely from the shallowness of domestic financial markets, characterized by a narrow investor base and underdeveloped institutional investors. Consequently, many countries have relied on external borrowing. 

Instruments denominated in local currencies attract little demand in international markets, compelling leaders to issue debt in foreign currencies—primarily the US dollar, followed by the euro. Relying on foreign currency borrowing exposes governments to significant exchange rate risk, as currency movements remain beyond their control. The Mo Ibrahim Foundation recently estimated that more than 70 percent of Africa’s external public debt is denominated in US dollars.

External debt denominated in foreign currency is a suboptimal financing strategy that amplifies a range of macro-financial vulnerabilities. It is a short-term solution to a long-term problem. Exchange rate risk is the most obvious concern, compounded by the nature of international capital markets. Sovereign debt issued in US dollars by countries other than the United States is typically priced with a risk premium above the benchmark yield on US Treasury securities, due to perceived credit risk and broader investor sentiment toward emerging markets. 

Moreover, African leaders frequently issue debt with relatively short maturities, heightening rollover risk and constraining fiscal space for long-term development planning. This dynamic results in a paradox: Governments rely on a costlier and more volatile source of financing to address structural investment needs that, by definition, require stability and predictability.

How much external debt is there?

The chart below presents the ratio of external debt-to-gross domestic product (GDP) ratio for selected African economies, alongside the nominal interest payments denominated in US dollars. In Mozambique’s case, external debt exceeds 300 percent of GDP. Aggregate interest obligations on external public debt across the continent now exceed $23 billion annually. This scale of debt service illustrates the growing fiscal burden associated with liabilities in foreign currency, which divert scarce public resources away from development priorities and render African countries more vulnerable to changes in global financial conditions. 

How much debt is too much?

The ongoing accumulation of public debt in Africa—exacerbated by the COVID-19 pandemic and increasingly frequent extreme weather events—has pushed several countries to the brink of default. According to the International Monetary Fund’s (IMF) 2023 Debt Sustainability Analysis, seven African countries are already in debt distress, while an additional thirteen are classified as being at high risk. At present, the IMF has active programs with twenty-five African countries with approved commitments exceeding 21.5 billion in special drawing rights (SDR)—equivalent to around $30.9 billion. SDR is an international reserve asset created by the IMF, valued against a basket of major currencies, and used to supplement member states’ foreign exchange reserves. 

Among IMF instruments, the most widely used in Africa is the Extended Credit Facility (ECF)—the organization’s flagship concessional lending tool for low-income countries. The ECF provides long maturities, zero-interest financing, and reform support. It is intended to help enable governments to address persistent balance-of-payments pressures and advance structural reforms. Typically, countries request an ECF arrangement when short-term financing proves insufficient to meet prolonged macroeconomic and developmental challenges. The chart below presents a more comprehensive picture of the IMF’s current engagement in Africa.

How a weaker dollar is helping

Any precise assessment of Africa’s external debt trajectory must consider the value of the US dollar. For African countries, where more than two thirds of external public debt is denominated in US dollars, a depreciation of the dollar relative to local currencies temporarily reduces the cost to service debt and creates additional fiscal space for the government. 

In this sense, a weaker dollar provides a measure of relief, not strain. To be sure, the value of a free-floating currency can change rapidly, reversing positive fiscal impact. It is important to note that a weaker dollar can also negatively impact African exports to the United States, as it makes African-made products more expensive relative to the stronger dollar. The trade landscape between the United States and Africa is further complicated by the recent expiration of the African Growth and Opportunity Act, a US trade program that grants duty-free access to the US market for thousands of products from eligible sub-Saharan African countries to promote economic growth and development.

The trend of a weaker dollar is likely to continue. Since the beginning of Trump’s second term, the US dollar has depreciated by roughly 12 percent against a set of major African currencies, yielding an estimated $2.3 billion in annual savings on interest payments. This additional fiscal space provides governments with a unique opportunity to either front-load debt repayments or accelerate the implementation of development projects. 

How African countries can seize this momentum

African countries could use the additional fiscal space to pursue front-loading debt repayments. In its April 2025 Regional Economic Outlook for Sub-Saharan Africa, the IMF commends the region for reducing public debt levels. However, the primary driver of lower public debt has been the GDP deflator—in other words, inflation—followed by real GDP growth, while the nominal stock of debt has remained broadly unchanged. The fiscal savings resulting from a weaker US dollar present an opportunity to accelerate principal repayments, strengthen the fiscal position, and bolster market confidence in the long term.

Another possible use of the extra resources would be to accelerate large-scale development projects aimed at boosting growth in the private sector—while avoiding the subsidization of private consumption—and enhancing productivity. It is important for governments to avoid welfare projects that would increase daily spending, creating long-term fiscal liability when conditions become less favorable. Instead, African governments should seek to leverage their young populations by expanding access to education and digital services, which could unlock innovation potential and lead to sustainable growth. 

Path toward the domestic debt market

In a long-term strategy, echoing the IMF’s recommendations, African countries should intensify their efforts to develop domestic debt markets as the foundation for long-term fiscal sustainability and effective debt management. Strengthening local markets would yield several benefits. First, issuing debt in local currency eliminates exchange-rate risk, insulating public finances from external currency fluctuations. Second, if appropriately designed, domestic markets can facilitate the extension of debt maturities, thereby enhancing stability and predictability in public debt management. Third, a broader domestic investor base ensures that interest payments remain within the local economy, supporting financial sector development and reducing the transfer of national resources abroad.

So, one might ask: What has prevented African countries from working toward a more robust domestic debt market? The answer lies in the complexity of the issue, which requires a long-term plan. Macroeconomic challenges such as a shallow investment base, underdeveloped financial infrastructure, and institutional weaknesses demand a well-anchored strategy. It is important to start this process when fiscal conditions are more favorable. Eliminating central bank deficit financing would be a welcome first step forward.

By most indications, the Trump administration did not set out with the intention to weaken the US dollar. But a reality of the second term so far has been a weaker dollar, and this outcome carries far-reaching implications. For African countries with external debt denominated in dollars, this development offers a welcome reprieve, easing fiscal pressures and creating new policy space. It’s now up to national authorities to proactively seize this opportunity, as the current environment of a weaker dollar may prove temporary. The moment is favorable—decisive action today can translate into lasting economic resilience tomorrow.

Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

Juliet Lancey, a young global professional at the GeoEconomics Center, contributed research to this article.

The post How a weaker US dollar can help debt-burdened African countries appeared first on Atlantic Council.

For Argentina, the US commitment provides crucial breathing room at a moment of maximum political vulnerability. Earlier this month, Argentinian President Javier Milei’s party suffered a major defeat in a provincial election ahead of the midterm polls in late October that will be critical for the government’s reform drive. The government’s chances of winning additional seats in congress looked slim as the peso slid against the dollar, despite heavy intervention by Argentina’s central bank. But this slide reversed sharply after the US announcement, providing the government a political lifeline that could prove critical in the upcoming election.

The details of the support package remain to be determined. For example, it’s not yet clear whether it would come in the form of a loan, a swap line (that is, a temporary exchange of US dollars for Argentinean pesos) or outright bond purchases by the US Treasury. All these options would offer Argentina several tangible benefits. First, they would provide dollar liquidity to defend the peso without further depleting the central bank’s reserves, which are a key performance indicator for the current International Monetary Fund (IMF) program. Second, they would signal to markets that Argentina has a powerful ally willing to counter speculative attacks, reducing borrowing costs and helping maintain market access. Third, the US backing could give Milei political room to implement painful but necessary reforms without risking a run on the peso.

In fact, there is a reasonable case for the United States to come to Argentina’s aid, independent of their leaders’ mutual political interests. Argentina has made important but painful strides in reforming its economy and addressing its budget deficit, but reforms are incomplete and the country lacks investment to return to a sustainable growth path. After two failed IMF programs under previous governments, the current attempt offers the best chance yet to get Argentina out of its doldrums. To the extent that it can help this process along, the United States should not leave the field to China, which would be able to exploit the vacuum left by an imploding Milei government and a return to Peronism two years from now.

But this support should come with important caveats. With US support at its back, Argentina needs to continue delivering on the policy side. To help this along, a close collaboration between the US Treasury and the IMF will be essential, not only in terms of their asks for the government (the United States has yet to announce whether it will impose any conditions) but also in ensuring their implementation. As an international institution, the IMF has the legitimacy and technical expertise to design an appropriate program, but it often lacks the political heft to insist on the country meeting its targets, a role that the US Treasury can share in this case.

Given Argentina’s long and painful economic history, there is much at stake for all involved. Argentina’s citizens have borne the brunt of their leaders’ past mismanagement, and a speedy return to higher growth at low inflation would help alleviate the hardship of recent years. And the United States will bring twenty billion dollars from the Exchange Stabilization Fund to the table while also staking its financial leadership on a successful outcome—both vis-à-vis the markets, which at some point will test US resolve to help Argentina, and China, which provided an earlier swap line but remained passive with respect to economic policies.

For the IMF, the participation of the United States arguably carries the largest risk. Although the fund is still Argentina’s largest creditor, with a peak exposure of $58 billion in 2026, it may find itself pushed to the sidelines on important program decisions. In part, this is because the United States, as the IMF’s biggest shareholder, has always exerted considerable influence on its management. More importantly, however, the IMF will have disbursed most of its loan by the end of 2025, leaving the United States in a strong position to set the terms for the remaining program years. Much will rest on the role played by Dan Katz, the US nominee to be the next IMF first deputy managing director.

As mentioned above, it would be best if the United States and the IMF were to closely coordinate their actions. But a greater challenge would come from a disorderly end to Argentina’s reform effort, which carries an uncomfortably high probability given domestic polarization, a tendency to stick to an overvalued exchange rate, and jittery financial markets that need little prodding to sell Argentinian assets.

In the worst case, Argentina would have received sizable funds from the ESF while the IMF would retain a large exposure. How would the Trump administration approach a situation in which another large debt restructuring might be necessary? Would the United States then question the IMF’s preferred creditor status—which rests on an informal agreement between members of the Paris Club of major lenders—and insist on being paid back first? If so, then this would not only put the IMF in a difficult spot, but it could also be a blow to the broader sovereign debt architecture, as it may imply a higher burden for other official and private creditors.

To sum up, the proposed US support for Argentina marks an important departure from past lending practices. Whatever the White House’s motivation, the loan will be a test for the relationship between the IMF and its biggest shareholder. In the best case, it might help Argentina to finally move to a higher growth path. But on the opposite end of the spectrum, it could undermine the global financial architecture, which is built around the IMF as a lender of last resort acting in the global interest.

Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former IMF official with decades of experience in economic crisis management and financial diplomacy.

The post Is the US currency rescue for Argentina positive statecraft or reckless favoritism? appeared first on Atlantic Council.

Estimates of Syria’s post-civil war cost of rebuilding range from $250 billion to $400 billion. This sum is beyond what Syria’s internal resources can generate and will require mobilization of significant outside public and private investment. Syria must articulate a realistic but ambitious national strategy for economic reconstruction and development, and it must align donor and investor projects with that strategy. To help finance reconstruction and development, Syria’s transitional government should expand its partnerships with international financial institutions (IFIs) and multilateral development banks (MDBs), as these institutions can play a key role in mobilizing global capital. The presence of MDBs alone will not be determinative of the success of Syria’s development strategy; other factors such as internal political stability and external economic relations are more important. However, MDB operations in Syria can be a development force multiplier, increasing investment and expanding the technical capacity of both the public and private sectors. MDBs have a greater capacity for investment in high-risk countries, such as Syria as it emerges from civil war. Their presence as public institutions can help mitigate unobservable and unquantifiable risks (such as political risks) for other private-sector participants. Equally important, MDBs provide technical assistance to both the public and private sectors through funding of education, training, technology transfer, and broadening of external partnerships.

Syria currently has memberships with five IFIs and MDBs, including two global and three regional institutions: the World Bank Group, the International Monetary Fund (IMF), the Arab Monetary Fund (AMF), the Arab Fund for Economic and Social Development (AFESD), and the Islamic Development Bank (IDB). The European Investment Bank (EIB), the investment arm of the European Union (EU), was previously active in Syria and has recently indicated its intention to resume operations there in line with EU policy.

Syria is eligible to join three more MDB institutions: the European Bank for Reconstruction and Development (EBRD), the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB). The transitional government of Syria (TGS) should immediately seek membership in the EBRD and the AIIB. Membership in the NDB is aligned to the expansion of the BRICS (Brazil, Russia, India, China, and South Africa) bloc of nations. Syria is not a member of the BRICS bloc and is unlikely to join in the foreseeable future.

Economic strategy

The TGS is trying to organize the physical reconstruction of the country while rebuilding state institutions that provide essential public services. Syria is emerging from six decades of dictatorship by the Assad family and a horrific fourteen-year civil war (2011–2024) that killed more than six hundred thousand Syrians and displaced about 13 million, more than half of the total population. Syria’s economy shrank by an estimated 85 percent from its pre-civil war levels, and the estimated cost of rebuilding ranges from $250 billion to $400 billion. Syria must build a dynamic, competitive economy to lift Syrians out of poverty. This will require significant investment, beyond what can be generated from internal resources.

The development of Syria’s economic strategy is the responsibility of the TGS and is beyond the scope of this analysis. However, some strategic issues need to be reviewed as we outline the role of MDBs in Syria’s reconstruction and development. Syria’s regional integration, particularly with the Gulf Cooperation Council (GCC) countries and Turkey, is just as important as Syria’s global integration. Syria has considerable economic potential, which differs from other countries in the region. It has an educated population, and its wage levels and exchange rates have not been artificially inflated by oil income (the so-called “Dutch disease”) because Syria is not an oil-exporting nation. Syria has significant potential to develop its agriculture and industrial base. Its ports on the Mediterranean are underdeveloped but well positioned to serve Syria’s development and, potentially, to integrate Syria economically with Iraq and the GCC countries.

Geography

Syria is located at the western terminus of Asia and is a central part of the land bridge between Europe, Asia, and Africa. Syria’s location has made it a target of external actors, notably Israel and Iran, seeking to dominate the country for their own destructive interests.

Most of Syria’s population and previous development are concentrated in the western corridor, north to south from the Turkish border to the Jordanian border through the cities of Aleppo, Hama, Homs, and Damascus. However, the development of Syria’s east-west corridors, from the Mediterranean coast through the cities of Aleppo, Raqqa, Hasaka, and Deir Ez-Zour, and onward to the Iraqi border, is of equal importance and represents an important economic opportunity. Syria’s Mediterranean ports—Latakia, Tartus, and Baniyas—can be further developed to service Syria’s needs, and Iraq’s as well. Syria’s best agricultural lands, and the majority of its water and oil resources, lay along this east-west corridor. Aleppo is the home of Syria’s textile industry and the northern plains stretching east of the city are the heart of its cotton production. The region accounts for a significant share of Syria’s production of agricultural output (wheat, pulses, olives, and livestock). The development of the east-west corridor regions is critical to Syria’s internal political reintegration and would complement regional economic projects such as Turkey’s links to Central Asia via the Caucasus and Iraq’s Development Road project linking Turkey to the Grand Faw Port project on the Arabian Gulf. Syria could be positioned as a western terminus for trade from and with other Asian countries, and Syrian exporters can certainly benefit from those transport links. MDBs can help Syria expand and modernize the transportation, energy, and technology infrastructure needed to take full advantage of its location.

Human capital

Syria has modest oil and gas resources and is currently a net importer of both. The TGS cannot rely upon oil export revenues to finance the country’s reconstruction and economic development. However, that means Syria does not suffer from the “natural resource curse” common in other regional economies that are reliant upon oil and gas exports. Oil and gas export revenues can lead to exchange rate appreciation—which, in turn, impairs the development of export-oriented manufacturing sectors.

Syria’s wealth is in its educated workforce. This is best reflected in its diaspora, which is globally successful in multiple industries across multiple continents and regions (the GCC, Europe, North America, South America, and West Africa). Syrians have long prized educational attainment, and the country has a large pool of skilled and semi-skilled labor that needs meaningful employment. Syria has been a net exporter of human capital for several generations, and this accelerated rapidly during the civil war as the country lost much of its middle class and intelligentsia. MDBs can play a useful role in addressing this by providing financing and technical assistance for the reconstruction and expansion of all levels of Syria’s educational infrastructure.

Building Syria as an economic hub

Foreign Minister Asaad al-Shaybani cited Singapore as an economic example for the new Syria at the Davos Summit in January 2025. This was an interesting choice because Singapore is an open economy that has developed into a regionally and globally significant trade, investment, and manufacturing hub. Syria has a favorable geographic location, spanning from the Mediterranean to Iraq and Jordan, and there are clear synergies Syria can achieve if it develops its transport and infrastructure links with its immediate neighbors. It has an educated population, with wages that are relatively low compared to those in the GCC or its immediate neighbors. The Syrian diaspora is globally successful and eager to invest, as are investors from the GCC. The country has agricultural and industrial potential that can be developed.

Other countries in the region, such as Jordan and Egypt, have similar—though not identical—resource endowments and similar levels of human capital development. However, for a variety of reasons beyond the scope of this analysis, they have not developed into globally competitive manufacturing or technology hubs. Because Syria must be rebuilt almost from the ground up after fourteen years of civil war and the overthrow of the Assad regime, there are fewer entrenched political and economic interests to block the country’s development. The Syrian people have a real opportunity to develop and implement the best available technologies, education, public administration practices, and infrastructure.

To exploit these advantages, Syria needs

• infrastructure investment in its ports, transportation, and energy production;
• reconstruction and expansion of its education system;
• building of public-sector capacity to deliver essential services and ensure transparency and rule of law;
• creation of a regulatory system that ensures competitive markets; and
• building of Syrian firms that can compete in regional and international markets.

MDBs can play an important part in developing Syria by mobilizing investment capital and providing the technical assistance needed by both the public and private sectors.

The potential role of MDBs

MDBs can assist Syria’s reconstruction and economic development through direct investment and provision of technical assistance to enhance local administrative capacity.

Direct investment: Private financial institutions will be reluctant to invest in high-risk countries, such as Syria as it emerges from civil war. MDBs have greater capacity than private financial institutions to mitigate these types of unobservable and unmeasurable risks. MDBs have an in-country presence and an ongoing relationship with host country authorities, providing them with an information advantage when it comes to assessing and mitigating country political and financial risks. MDBs provide public budget support and policy reform advice, as well as supporting government and corporate capacity building. Their presence in a project can provide a political umbrella to deter adverse events because MDBs are in a better position to influence a host government’s potentially adverse decisions. The presence of an MDB helps to reassure private investors and encourage their participation in project financing.

Technical assistance: MDBs engage with local and national governmental authorities and provide key technical assistance that helps to enhance local administrative capacity. For example, the TGS faces an important political and national security challenge in the disarmament, demobilization, and reintegration (DDR) of fighters from the various armed groups that participated in the struggle against the Assad regime. MDBs, such as the World Bank, can play a useful role in advising and funding DDR programs. Another example would be the World Bank’s well-regarded technical assistance program (the Stolen Asset Recovery Initiative (StAR)), which works with partner countries that seek to recover stolen assets. This program could help the TGS recoup the billions stolen by the Assad family and Assad regime officials.

Diversification benefits

Syria will benefit from becoming a member country in more MDB institutions. Membership can insulate Syria from changes in resource availability or changes in political relationships with donor nations. The specific benefits include the following.

• More sources of financing: Syria’s overall borrowing capacity is constrained by its debt-carrying capacity, which is presently quite limited. Nonetheless, it is still useful for the TGS to have access to a greater number of sources for funding and technical assistance.
• Differing institutional expertise: Each MDB has its own areas of expertise that are unique to that institution. The EBRD has successful programs to help finance growth of small and medium enterprises (SMEs), private infrastructure, and municipal finance. The AIIB has executed successful projects in renewable energy, digital and information technology infrastructure, and transportation.

By becoming a member of more MDB institutions, the TGS can draw upon each of these institutional areas of expertise, as appropriate to Syria’s development needs.

Additional potential MDB partner institutions

EBRD

The EBRD was established in 1989 to address the transition needs of the nations of Central and Eastern Europe as they emerged from communist rule. Its headquarters are in London and, following the Arab Spring in 2010, it expanded its area of operations to encompass the countries of Western Asia and North Africa, supporting democratization and economic development in those regions. The EBRD is currently active in Turkey, Jordan, and Lebanon.

Accession to the EBRD as a member nation requires an affirmative vote by two-thirds of governors, representing at least three-quarters of members’ total voting power. The United States is the largest single shareholder, with 9.2 percent of shares, followed by the United Kingdom, France, Germany, and Japan, with 8.9 percent each.

The EBRD’s purpose, as reflected in its founding documents, is to support “multiparty democracy, pluralism and market economics.” EBRD operations focus on former Soviet bloc countries’ transition from a communist state-owned economic model toward market-based economics. That mission remains, even as the EBRD’s area of operations has expanded to include countries in Western Asia and North Africa that, like Syria, have a legacy of state ownership of key sectors of the economy. The EBRD’s mission differs from that of other development banks, such as the World Bank, in that it focuses less exclusively on poverty alleviation and more directly on economic transition and political governance.

Since its inception, the EBRD has invested more than €210 billion in more than 7,500 projects. It undertook 584 projects in 2024, investing €16.6 billion. EBRD investment in green economy projects accounted for 58 percent of the total financing provided in 2024.

The EBRD has a reputation for expertise in several areas directly relevant to Syria. It has programs for financing and advising SMEs, local financial institutions, agribusiness, sustainable energy, and municipal infrastructure. The TGS will need to reach out to ascertain the level of shareholder support for its membership. But Syria’s membership in the EBRD would dovetail with stated US, UK, and EU objectives of stabilizing Syria’s economy and promoting stable governance.

AIIB

The AIIB is the newest MDB, beginning operations from its headquarters in Beijing in 2016. Its mission is the financing of infrastructure on the Asian continent, with an emphasis on projects that are sustainable and technology enabled, and that promote regional connectivity. Sponsored by China (which holds the most shares), the AIIB has grown to 110 members. The United States and Japan have declined to seek membership, but many European nations have joined the institution. Several of Syria’s immediate neighbors (Iraq, Jordan, and Turkey) are already members of the AIIB, and Lebanon is a prospective member. Accession by new members must be approved by a special majority vote of the AIIB Board of Governors, which represents a majority of the institution’s voting power.

The AIIB emphasizes four thematic priorities, including

• green infrastructure;
• connectivity and regional cooperation;
• technology-enabled infrastructure; and
• private capital mobilization.

The AIIB financed 303 projects between 2016–2024, with a cumulative investment of $58.9 billion. The sector breakdown of the projects is summarized in the chart shown here.

The AIIB’s track record on infrastructure finance and its emphasis on regional connectivity are directly applicable to Syria. The AIIB’s priorities emphasize the importance of connectivity as a pathway to economic development. For example, the AIIB is co-financing $250-million expansion of rail links between eastern Turkey and the Caucasus. Regional economic powers in Western Asia (e.g., Turkey, Saudi Arabia, and Qatar) have proposed plans for the development of cross-border infrastructure and integration. Syria’s participation in these plans, through the development of its infrastructure, will in turn advance regional integration efforts. The AIIB can be a useful financing partner in these efforts.

Aligning assistance with development priorities

Since December 2024, there is considerable political and economic excitement about the potential of a stable, rapidly developing Syria. A large measure of this excitement was generated by the United States, which has pressed ahead with easing of sanctions to give Syria a chance to emerge from the catastrophic Assad era. European countries have similarly eased sanctions, and most regional powers—with the notable exceptions of Israel and Iran—have moved quickly to shore up Syria politically and economically. A rush of donors and investors have announced new projects and publicized the signing of investment memoranda. However, there is a risk that these initial projects will conflict with, or potentially undermine, progress on less glamorous but more pressing tasks such as unifying military control, establishing basic national security from internal and external threats (which are often interrelated), rebuilding public administration and essential services, and aiding returning Syrian refugees to start reconstruction.

The TGS must assert clear priorities in reconstruction and development and ensure that assistance and investment align with the country’s development priorities. The TGS can benefit from the various MDB institutions’ differing areas of expertise, aligning each one with specific development goals. For example, despite the easing of sanctions, Syrian banks face immediate challenges in reestablishing correspondent relationships with outside banks because of concerns about anti-money laundering and countering the financing of terrorism (AML/CFT) risks. Until Syrian banks can reestablish those correspondent relationships, it will be difficult for the country to secure the promised investment inflows.

In the immediate term, the IMF, World Bank, and Financial Action Task Force (FATF) via its regional body, the Middle East and North Africa Financial Action Task Force (MENAFATF), are the most logical partners to help address AML/CFT risks in the banking sector. FATF is the standard-setting body, and the IMF and World Bank both provide significant policy support to many countries to assess their compliance with relevant AML/CFT standards. The urgency of addressing AML/CFT risks is compounded by the fact that the TGS is attempting to suppress drug trafficking, much of which is linked to former regime officials. Blocking drug traffickers’ access to both Syrian and global financial institutions is an important step that the TGS can take on national security grounds, and is also crucial for rebuilding local and global confidence in the Syrian financial system.

In the medium term, the TGS can leverage the expertise of MDB institutions like the EBRD, which has significant experience in executing local currency credit facilities, using local banks as partner institutions. The EBRD has used such facilities to build the capacity of local financial institutions and to extend credit to underserved economic sectors, especially SMEs. That experience could be usefully replicated in Syria.

There are numerous other examples of how MDBs can be useful partners in executing Syria’s development priorities. Expanding relationships with these institutions would give the TGS more options for accomplishing those priorities.

Next steps

The TGS should seek membership in both the AIIB and the EBRD but might prioritize moving forward with membership in either of these MDBs, based on its assessment of reconstruction and development needs. The AIIB has an institutional focus on regional connectivity, which complements the heightened investor interest in various projects to reintegrate and reconnect the Syrian economy within the region. The EBRD has a demonstrated track record in local financial sector development, agribusiness, and municipal infrastructure finance, which are clear priorities in Syria’s reconstruction. Accession to the EBRD can be a lengthier process because of the requirement for shareholders representing three-quarters of the institution’s capital to approve, versus the majority approval required by the AIIB shareholders. The TGS should begin diplomatic outreach to the primary shareholders of these MDBs and inform them of its interest in accession to membership. The TGS should concurrently reach out directly to the EBRD and AIIB to notify these institutions of Syria’s desire to begin the process of accession to membership.

Basil Kiwan is a contributor with the Atlantic Council, and a former financial regulation specialist at the Federal Deposit Insurance Corporation. He previously served at the US Treasury Department on a variety of international economic policy issues.

Econographics Jul 17, 2025

Charting a strategic path for Syria’s postwar reconstruction

By Kimberly Donovan, Jonathan Panikoff, Lize de Kruijf, Manal Fatima

As Syria emerges from over a decade of conflict, easing sanctions by the United States, the European Union (EU), and other European partners is an important step toward reintegrating Syria into the global economy. Yet, for a country that has been economically isolated for over fourteen years, lifting sanctions is only the beginning.

Economy & Business Financial Sanctions and Economic Coercion

Econographics May 29, 2025

After partial relief, what’s next for Syria sanctions?

By Alex Zerden

Syria remains a high-risk jurisdiction due to years of conflict, endemic corruption, state institution collapse, narcotrafficking of captagon, insufficient anti-money laundering efforts, and inadequate financing of terrorism controls.

Economy & Business Financial Sanctions and Economic Coercion

New Atlanticist Jun 30, 2025

Less investment, less influence: Why the US risks losing ground in the Indo-Pacific

By Lize de Kruijf and Nazima Tursun

The US withdrawal of foreign aid to Indo-Pacific countries creates space for China to expand its influence in the region.

Defense Policy Economy & Business

Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) publishes leading-edge research and analysis on sanctions and the use of economic power to achieve foreign policy objectives and protect national security interests.

Learn More

The post Expanding Syria’s multilateral development bank engagement appeared first on Atlantic Council.

Given their large war chest to fight financial crises, leveraging US contributions by a ratio of five to one, it remains unlikely that the United States will withdraw from the institutions it was critical in founding eighty years ago. However, it would also be surprising if the White House does not try to extract some major concessions from the multilateral lenders, prompting insider talk of the Bretton Woods institutions facing their own multilateral “liberation day.”

In late July, the IMF announced that Gita Gopinath, the IMF’s first deputy managing director, is stepping down at the end of August. Whether coincidental or not, her exit should be seen in this context, even if it would be in line with the long-standing tradition that new US administrations appoint their own management representatives at the IMF. Unlike at the World Bank, where a US candidate for the presidency requires confirmation by the executive board, the choice of first deputy is for the IMF’s managing director to make and doesn’t require formal board approval.

It has been rare—but not unheard of—that the head of the IMF would resist a call for change or a specific candidate proposed by the IMF’s largest shareholder. In the current situation, it seems safe to assume that Managing Director Kristalina Georgieva will follow through on an appointment proposed by the US administration. However, any speculation that this would herald a major reorientation of the IMF’s work is premature.

There are two reasons for that. First, the allocation of work within the institution’s management body lies solely in the managing director’s discretion. Georgieva could therefore accept a US appointee with a more constrained view of what the IMF should be doing but divide responsibilities in a way that would leave her first deputy in charge of minor portfolios. Gopinath’s replacement could therefore find his or her mandate quite constrained, providing little room to initiate meaningful change.

Second, Georgieva has certainly been the face of the IMF’s reorientation toward low-income and climate work in recent years. But it would have been impossible for her to spearhead this transition without the support of France and similarly minded European shareholders. These countries were instrumental in supporting her as the EU’s candidate in 2019 and extending her term in 2024. By contrast, some of the IMF’s largest financial contributors, including Japan and Germany, have become less effective in recent years to keep the IMF focused on its core expertise. Therefore, even with a strong first deputy managing director in place, the United States would not necessarily have the votes to secure changes in how the institution currently works.

To the supporters of the IMF’s new course, this might provide the basis for an acceptable deal with the United States. Some sacrifices might be required to satisfy multilateral hawks in the US administration, such as terminating the Resilience and Sustainability Trust, a resource-intensive lending program with little impact. But many shareholders will cling to the hope that, once an agreement has been struck, the work of the institution might proceed largely along established tracks.

Perhaps they are right. Previous administrations were also critical of the IMF’s work but settled for minor concessions that proved short-lived. For example, when global current account imbalances first emerged in the 1990s, the IMF embarked on a complex process to brand countries with “fundamentally misaligned” exchange rates, which failed spectacularly and was abandoned a few years later. Another example, following the 2010 Greece program, was a US push for tying larger loan programs to a higher standard for debt sustainability. However, this has not stopped the fund from engaging in de-facto evergreening its loans—that is, extending fresh loans to ensure its own repayment—to Argentina, Egypt, and a host of developing countries.

Failing to deliver on core US demands would be a dangerous strategy, however. The IMF has a number of difficult problems at hand with the potential to undermine both its reputation and its financial position. Should these problems worsen, they could play right in the hands of its critics within an administration that is known for changing positions with very short notice.

• For example, the Argentina program has been a success so far, due to ruthless cost-cutting on the part of the Milei administration, but the country’s difficulties in accumulating foreign exchange reserves are a sign of the politically thin ice on which the program is resting.
• Second, in Ukraine, curbing the independence of the country’s anti-corruption agencies would have been a major blow to the IMF, which spent a good deal of the 2010s working to have these institutions established. Although Ukrainian President Volodymyr Zelenskyy has now backtracked on his earlier decision, goodwill for this extraordinarily risky program is under threat after another report of large-scale corruption in the armed forces.
• Third, while the recent External Sector Report has finally taken a more critical view of China’s manufacturing policies, it is still being criticized for glossing over large current account imbalances that are central to the White House’s policy agenda.
• And finally, by extending loans to low-income countries without insisting on debt restructuring and more stringent conditionality, the IMF is setting itself up for another debt forgiveness campaign, which had detrimental effects on the institution’s finances and operational effectiveness after it came to pass in the early 2000s.

Rather than trying to get away with only a modicum of change, liberal-minded shareholders would therefore be well advised to work with moderate forces within the administration to secure a fundamental turnaround of the institution. To deal with the disruption from global fragmentation, higher trade barriers, and the ascent of stablecoins and related monetary instruments, there is a desperate need for tighter surveillance and innovative policy proposals in the IMF’s core areas.

With the Federal Reserve increasingly being politicized and subject to management scrutiny, it is even more important for the IMF to guide policymakers through a generational shift in the global economic environment. The institution needs its major shareholders aligned to tackle new challenges, and it deserves a management team qualified to lead it on this new path.

Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former IMF official with decades of experience in economic crisis management and financial diplomacy.

The post Trump’s review of US membership in the IMF offers a rare chance for reform appeared first on Atlantic Council.

Access to finance and technology is the most limiting constraint to economic growth and progress toward the 2030 Sustainable Development Goals (SDGs). Nowhere is this constraint more overbearing than in Africa, where the extremely high incidence of sovereign debt has undermined governments’ capacity to invest sustainably in human capital development and research infrastructure. This has suppressed innovation and the building of technological infrastructure, exacerbating gaps (both income and otherwise) between Africa and other parts of the world.

Achieving the SDGs at the global level increasingly depends on progress being made in Africa. To date, however, there has been little to boast about, both across Africa and globally. The welfare gap between Africa and other regions of the world, including regions comprised of developing countries, is enormous and has been widening. Environmental degradation is accelerating. The global annual financing gap for the SDGs is immense, estimated at around four trillion dollars per year through 2030; for Africa alone, that figure sits at $1.3 trillion each year. The existing global financial architecture has drained scarce resources from Africa, exacerbating balance-of-payments constraints in most African countries, some of which have become net creditors to the rest of the world.

Credit rating agencies have inflated risk perceptions for the sixteen African countries that issued bonds, and the cost of such ratings biases is estimated to be $74.5 billion in excess interest and forgone funding. Last year, African governments spent an estimated $163 billion on debt servicing (a significant increase from $61 billion in 2010), dwarfing development financing from international financial institutions. The world’s prevailing development model consistently fails to meet the needs of the present, worsens global inequality and negative externalities, and erodes the long-term wealth of nations. Taken together, these factors jeopardize progress toward the SDGs and undermine the ability of future generations to meet their own needs.

Only 17 percent of the SDGs are currently on track, and more than a third have either stalled or are regressing. Looking at Africa specifically, the number of people falling into poverty has increased sharply in the aftermath of the COVID-19 pandemic, and Africa now accounts for around 55 percent of global poverty. Sub-Saharan Africa is home to more than 237 million children living in extreme poverty (representing more than 71 percent of the global total), up from 210 million in 2013. These realities show setbacks for the first SDG of eradicating poverty.

Dispiriting poverty metrics and limited progress toward the SDGs have been at least partially attributed to the challenging global operating and geopolitical environment. Overlapping health, economic, and social crises resulting from the pandemic—compounded by tightening global financial conditions, rising geopolitical risks and uncertainty (including trade policy uncertainty), and climate catastrophes—have derailed countries’ growth trajectories and undermined progress toward the SDGs, especially in the most vulnerable low-income countries.

Heightened geopolitical tensions are undermining the global cooperation necessary to narrow the SDG financing gap or restructure sovereign debt to reduce the volatility of public spending and attract private investment. Simultaneously, rising protectionism is stifling growth in low-income countries, which rely heavily on trade for economic expansion and foreign exchange reserves. Global volatility is only making the situation worse, especially in the most vulnerable and natural-resource-dependent economies, where the deterioration of commodity terms of trade has been the bane of economic growth, exacerbating internal and external imbalances.

While the UN says that SDG 1 (eradicating poverty) has seen “moderate” and “marginal” progress, such gains are attributed mainly to the spectacular performance of Asia’s emerging market economies. In particular, China has benefited enormously from its integration into global value chains. Over the past forty years, the number of Chinese people living in poverty fell by almost 800 million, meaning China by itself accounted for around three-quarters of the global reduction in the number of people living in extreme poverty.

In China and other high-performing Asian economies that have driven the reduction of global poverty, sustained public investment in human, physical, and digital capital has catalyzed private investment, including large-scale foreign direct investment (FDI). According to recent data, Asia was the destination of more than 71 percent of combined inward FDI in the developing world in 2023, dwarfing Africa’s 6 percent share.

Sustained investment has helped establish Asia’s robust manufacturing base, driving the diversification of growth sources in the region and expanding employment opportunities, thereby strengthening the foundation of macroeconomic stability. And in a generally favorable geopolitical environment of increasing global economic integration and supply-chain optimization, the expansion of manufacturing industries catalyzed technology transfers. This, in turn, further enhanced Asian countries’ integration into global value chains and accelerated income convergence with advanced economies.

Meanwhile, entrenched inequality and the use of technology as a tool for rent-seeking have contributed to the marginalization of Africa in the distribution of global value chains. Indeed, trade in value-added goods is highly concentrated in three regions—Asia, Europe, and North America. Entrenched inequality and rent-seeking have also hindered the expansion of manufacturing industries, which have been key drivers of growth and welfare improvement in low- and middle-income countries.

But amid increasing exports of foreign value-added content, even more enduring economic costs have been imposed on African economies. Higher interest rates on external debt have shrunk fiscal space and locked countries into chronic deficits of human and physical capital, inhibiting FDI inflows and stymying the diversification of growth sources and the expansion of employment opportunities. FDI and diversified growth resources are necessary to catalyze technology transfers and to help the continent enter the global value chain..

Instead of providing African countries with adequate financing of sufficient quality (regarding the cost of capital and maturity of loans), the global financial architecture has subjected them to growth-crushing and default-driven borrowing rates. These increase the fiscal incidence of sovereign debt and undermine countries’ capacity to scale up the investment required to achieve the SDGs. Both African sovereign and corporate entities pay interest charges often 5 to 10 percent higher per year than the borrowing costs paid by advanced economies. Unsurprisingly, paying interest on external debt has become one of the largest expenses for these countries, averaging 14 percent of government spending across the region. Over thirty African countries spent more on debt interest services—excluding principal repayments—than on public healthcare in 2023.

And yet the world contains great wealth, and parts of it are awash with cash. At the end of 2023, total assets under management at the world’s five hundred largest investment managers reached $128 trillion. Developing countries, especially low-income African nations, should not have to choose between paying the interest on their external debt and providing healthcare to their vulnerable population, nor between debt sustainability and sustainable development. In the words of Nelson Mandela, “Like slavery and apartheid, poverty is not natural. It is manmade, and it can be overcome and eradicated by the actions of human beings. And overcoming poverty is not a gesture of charity. It is an act of justice.”

World leaders attending the 4th International Conference on Financing for Development must use the opportunity to transcend the old dichotomic developing/developed country mindset that has underpinned systemic global inequality. They must also take steps to improve access to financing and extend the benefits of education and technology globally. If they don’t, global income convergence will remain elusive, and so will the highly technology-intensive net-zero transition. Until then, progress toward the world’s 2030 Sustainable Development Goals will continue to disappoint.

Hippolyte Fofack, a former chief economist at the African Export-Import Bank, is a Parker fellow with the Sustainable Development Solutions Network at Columbia University, a research associate at Harvard University, a distinguished fellow at the Global Federation of Competitiveness Councils, and a fellow at the African Academy of Sciences.

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

Learn more

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Here’s a look inside the numbers that will frame the summit.

The G7 was formed fifty years ago so the world’s advanced-economy democracies could align on shared economic and geopolitical challenges. But what happens when the cause of instability is coming from inside the G7? That’s the question confronting the leaders as they assemble this week in Kananaskis. 

US President Donald Trump is still getting to know some of his new colleagues, including German Chancellor Friedrich Merz, UK Prime Minister Keir Starmer, Japanese Prime Minister Shigeru Ishiba, and the summit’s host, Canadian Prime Minister Mark Carney. Trump will try to coordinate the group against China’s economic coercion. But the rest of the leaders may turn back to Trump and say that this kind of coordination, which is at the heart of why the G7 works, would be easier if he weren’t imposing tariffs on his allies. The chart above shows the friction points heading into one of the most consequential G7 summits in the organization’s history.

—Josh Lipsky is the chair of international economics at the Atlantic Council, senior director of the GeoEconomics Center, and a former adviser to the International Monetary Fund (IMF). 

Originally created as an economic coordination body, the G7 began to put foreign policy and national security on its agenda in the 1980s, as the Soviet Union’s political influence was waning. Soon after, Russia attended its first G7 Summit as a guest in 1991, formally joined in 1998, creating the Group of Eight (G8), and then was suspended in 2014 due to its annexation of Crimea. 

In the years since, new geopolitical rivals have entered the fray: Since the COVID-19 pandemic, G7 summits and declarations have attempted to address China’s role in the global economy. Last year’s leaders’ communiqué was especially harsh on China—which was mentioned twenty-nine times—on everything from its material support to Russia’s war against Ukraine to Beijing’s malicious cyber activities. But China was once a guest at the forum, first joining in this capacity in 2003.

Other members of the G7+5, an unofficial grouping of large emerging markets—India, Mexico, Brazil, and South Africa—have been invited as guests in recent years. If that sounds familiar, it is because India, Brazil, and South Africa, along with Russia and China, are the founding members of the BRICS group of emerging economies, which some would consider a representation of the geopolitical and economic competition the G7 faces today. 

This year, Australia, Ukraine, South Korea, Brazil, Mexico, and India were invited to attend as guests. These invitations are a signal of broad alignment among the G7 and its guests. These invitations demonstrate the importance of the guests’ economic might on the global stage, even though India has shifted away from the G7 quite significantly in the last fifty years, as seen in the graph above. In 1992, when Russia first attended the G7 as a guest, its gross domestic product (GDP) was less than 1 percent of the world’s GDP, and the combined economies of the five founding BRICS countries made up less than 9 percent of global GDP. At the time, the G7 represented 63 percent of the world’s GDP. Today, the G7’s share is now 44 percent of the world’s GDP and the founding BRICS members’ share has more than doubled to almost 25 percent. 

—Ananya Kumar is the deputy director for future of money at the Atlantic Council’s GeoEconomics Center.

In 2024, G7 countries attracted over 80 percent of global private artificial intelligence (AI) investments, led primarily by the United States. In ten years, private AI investments have grown almost fifteen-fold. This month, the US Department of Commerce rebranded its AI Safety Institute as the Center for AI Standards and Innovation (CAISI)—shifting away from an emphasis on “safety” and toward promoting rapid commercial development.

Carney has said that he plans to put AI at the top of his agenda at the upcoming G7 Leaders’ Summit. He has been a long-standing advocate of AI—dating back to his 2018 presentation on AI and the global economy while he was governor of the Bank of England.

But while the United States leads in AI innovation and investment, Europe continues to set the pace on regulation, and China strategically develops its own AI models. All this leaves Canada asking where it fits in.

That may be why Carney hopes to lead on this issue. The G7 presidency offers Canada a unique opportunity to convene democracies to work together on AI. Rather than trying to outspend the United States or out-regulate Europe, Canada can focus on building connections—creating shared standards, developing trusted public-private data hubs, coordinating strategic investments, and outlining guidelines for common learning and collaboration across borders.

—Alisha Chhangani is an assistant director at the Atlantic Council’s GeoEconomics Center.

Ten years after the first G6 meeting took place in France, another landmark meeting took place at the Plaza Hotel in New York, in September 1985. At the meeting, then US Treasury Secretary James Baker convinced his counterparts from West Germany, France, the United Kingdom, and Japan to support a significant devaluation of the US dollar—what became known as the Plaza Accord.

Today, the dollar’s value relative to its G7 counterparts is on the rise again, fueled by tight monetary policy and expansionary fiscal spending. Although the current appreciation is milder than the surge seen in the early 1980s, the Trump administration may use the G7 Summit to raise concerns about the burden of being the world’s reserve currency, especially when it comes to export competitiveness. In late 2024, the current chair of Trump’s Council of Economic Advisers, Stephen Miran, proposed a “Mar-a-Lago Accord” as an updated version of the Plaza Accord, though no real progress on this is apparent. Moreover, this time a key global player is absent from the conversation—China.

—Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

The finance ministers and central bank governors of the G7 already held their meeting last month in the Canadian Rockies, emerging with a consensus on tackling “excessive imbalances” and nonmarket policies. While the G7’s finance ministers and central bank governors’ communiqué didn’t call out China by name, it’s clear that’s who they were referring to. Simultaneously, the US-UK trade deal called for the United Kingdom to meet US requirements on the security of supply chains, which infuriated Beijing.

Washington wants coordinated economic security partnerships to help counter China and encourage more investment in the United States. But the United States has been calling for allies to divest from China for a while now. In response, G7 counterparts could point to the data above and ask: How much more do we need to give?

Over the past five years, nearly every G7 country, with the exception of Canada, has scaled down their investments in China and scaled up their investments in the United States. For example, Japan has reduced foreign direct investment in China by 60 percent over the past decade, including shuttering a major Honda plant in Guangzhou. Meanwhile, the Japanese carmaker pledged to put $300 million into a plant outside of Columbus, Ohio. This has been the trend as the United States’ G7 partners reassess their economic dependencies on China. But amid ongoing trade wars, how much are they willing to coordinate more closely with the United States?

—Jessie Yin is an assistant director with the Atlantic Council’s GeoEconomics Center.

Foreign aid, or official development assistance (ODA), from G7 countries dropped sharply in 2024, and early projections through 2025 and 2026 suggest even steeper declines ahead for most nations. The United States has exhibited the most drastic retreat, following the effective dismantling of the US Agency for International Development. But European countries have also scaled back development budgets and are redirecting funds toward defense and domestic economic issues. While ODA briefly surged in response to the COVID-19 pandemic and the war in Ukraine, that uptick masked a longer-term downward trend in traditional development funding as a percentage of G7 countries’ economies.

Most G7 nations have failed for years to meet the United Nations Sustainable Development Goals Target 17.2, which called for allocating 0.7 percent of gross national income to ODA. As of 2024, none of them has reached this benchmark. This retreat is particularly troubling given today’s fractured geopolitical and economic landscape. In such times, investing in global partnerships and life-saving aid through ODA is not just a moral imperative—it’s also a strategic one.

—Lize de Kruijf is a program assistant at the Atlantic Council’s Economic Statecraft Initiative. 

A major focus heading into the G7 Summit will be how Carney handles his latest meeting with Trump. The two managed to have a cordial meeting in May, and Carney’s announcement this week that Canada will increase its defense spending could help to placate Trump, who has long complained about Canada’s lagging defense spending.

But Canada is also looking beyond its southern neighbor. Carney has invited the leaders of Australia, Brazil, India, Indonesia, Mexico, South Korea, South Africa, Ukraine, and Saudi Arabia to join him in Alberta. Under former Prime Minister Justin Trudeau, Canada’s relationships with both Saudi Arabia and India reached diplomatic low points. By inviting these leaders, Carney is demonstrating a willingness to reengage partners. In no area is Carney more likely to pursue new partnerships than in the defense sector. Canada stated its desire to join the ReArm Europe Initiative and has signed a major deal for an Australian radar system. Expect Carney to seek new partners as Canada rebuilds its defense capacity, potentially with some of the countries invited to this year’s G7.

—Imran Bayoumi is an associate director at the Atlantic Council’s Scowcroft Center for Strategy and Security.

Canada’s hosting of the G7 Summit in Alberta carries exceptional significance amid escalating tensions with the United States. Trump’s attendance, which will mark his first G7 Summit since 2019, signals renewed engagement with Canada. This could spark talks on renegotiating the United States-Mexico-Canada Agreement (USMCA) ahead of the trade deal’s first joint review in July 2026. The timing of the G7 Summit coincides with heightened Canadian nationalism and intense public focus on Canada-US relations, particularly around tariff disputes affecting sectors such as steel.

The Trump-Carney relationship differs markedly from previous dynamics between Trudeau and Trump, potentially enabling more productive G7 cooperation when US foreign policy dominates global conversations. The trilateral presence of Mexican President Claudia Sheinbaum, Trump, and Carney creates an opportunity for preliminary USMCA discussions. However, critical questions emerge: Will Mexico and Canada align against the Trump administration? Will Canada prioritize repairing bilateral US relations over Mexico-Canada ties? The summit’s outcome is likely to significantly shape hemispheric trade relationships and regional diplomatic strategies.

—Maite Gonzalez Latorre is a program assistant at the Adrienne Arsht Latin America Center and Caribbean Initiative.

Sophia Busch, Ella Wiss Mencke, Ethan Garcia, and Miguel Sanders contributed to the data visualizations in this article. The data visualization titled “US jobs rely on Mexico and Canada more than any other trade partner” originally appeared in an article by Sophia Busch published on January 16, 2025.

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Click to jump to an expert analysis:

Melanie Hart: It looks like China has the upper hand in trade talks with the US 

Josh Lipsky: Treating US-China trade like a light switch will cause it to short circuit

Barbara C. Matthews: The tariff suspension creates a powerful incentive for third countries to choose a side

L. Daniel Mullaney: Whatever the outcome of talks, tariff unpredictability will reduce US trade dependence on China 

Hung Tran: The agreement is overshadowed by the possibility of abrupt change

It looks like China has the upper hand in trade talks with the US

The big takeaway from the weekend’s US-China meetings: Washington blinked, and Beijing decided to take the easy offramp on offer. 

It is no accident that these talks occurred just as Walmart and other major US retailers ramped up their warnings to the administration to prepare for COVID-19 pandemic-level shortages. Shortages were already showing up in shipping and port data. Consumer retail shelves were coming up next. And there is zero indication that US consumers are willing to experience shortages reminiscent of the Great Depression to accommodate a trade war with unclear aims.  

Meanwhile, Beijing was managing the economic fallout on the other side of the Pacific. Exports pivoted from the United States to Southeast Asia (likely the first step in a route designed to circumvent US tariffs). Many Chinese citizens praised President Xi Jinping for standing up to US bullying. Those that did not were censored. 

From Beijing’s perspective, China now has what it wants with all US administrations: a negotiation process. And it didn’t give up anything of value to get it. At home, Xi secured strongman bona fides for standing up to US President Donald Trump and a new boogeyman to blame for China’s domestic economic woes. Globally, Xi gains points for looking like the rational actor willing to come to the table and seek a deal. Beijing has been trying to engage the United States in talks over fentanyl for months. China issued a white paper back in March laying out its efforts to crack down on fentanyl. Politically, as of May, we are now back where we started at the beginning of the second Trump administration, with one major change: the United States and China are now actively engaged in trade negotiations, and it feels like China has the upper hand. 

—Melanie Hart is the senior director of the Atlantic Council’s Global China Hub and a former senior advisor for China at the US Department of State. 

Treating US-China trade like a light switch will cause some short-circuiting

This was a massive, unexpected, and very welcome de-escalation. We can cite gross domestic product statistics and market reactions, but the real driver from the US side was the prospect of missing backpacks, sneakers, and T-shirts at Walmart and Target just as parents start back-to-school shopping. 

China had a similar sense of urgency. Layoffs across ports and factories in southern China were becoming widespread. Apparently, the Chinese came into the negotiations ready to address nearly all the complaints the United States had raised and did so in a way that made US Treasury Secretary Bessent and US Trade Representative Jamieson Greer believe it was a genuine show of good faith.

Now the hard part starts—getting to a Phase Two trade deal. Inside the Trump administration, there is confidence that it can happen in ninety days. But the US-China trade deal signed during Trump’s first term took two years to negotiate—from 2018 to 2020—and this one is more complex and will address fentanyl, technology, semiconductors, and more. In the meantime, the Trump administration is going to introduce new tariffs, including on pharmaceuticals.  

Treating the relationship between the world’s two largest economies like a light switch is going to cause some short-circuiting. Expect a new surge of imports in June and July as retailers try to get ahead of whatever the fall may bring—it’s very difficult to run a global economy with this kind of uncertainty.  

The deal may be especially concerning for Europe. While Europe avoided the onslaught of cheap Chinese goods redirected to their shores, the United States is still on the hunt for revenue generators to offset the cost of Trump’s domestic priorities, including tax cuts. With China’s tariffs at least temporarily slashed and the negotiations with the European Union (EU) not gaining any traction, this puts Brussels in the hot seat.  

—Josh Lipsky is the chair of international economics at the Atlantic Council, senior director of the GeoEconomics Center, and a former adviser to the International Monetary Fund (IMF). 

The tariff suspension creates a powerful incentive for third countries to choose a side

The great global trade rebalancing of 2025 continues to gather momentum, illustrating that asymmetric negotiation is effective for counterparts seeking strategic shifts. The time horizon for tariff policy uncertainty has now extended to mid-August, aligning neatly but unfortunately with likely US fiscal policy constraints and the US budget process. The concessions by both China and the United States this weekend extend far beyond the headline temporary tariff reductions.   

Both parties have now publicly acknowledged that the Bretton Woods structure for creating economic interdependence continues to create powerful incentives for de-escalation; neither China nor the United States (much less the rest of the world) can afford to pursue long-term decoupling and trade diversion. This is the most positive signal that emerged from Switzerland over the weekend. 

Both parties also now tacitly agree that the trade imbalances created over the course of the last few decades must be addressed. China effectively had no choice: the last sixty days have seen a range of entities (the EU, the World Trade Organization, and the United Kingdom) publicly agreeing with the United States’ list of grievances against the multilateral trading system articulated in Trump’s executive order establishing high reciprocal tariffs. 

The ninety-day reprieve creates incentives for both the United States and China to build new bilateral trade arrangements with third countries to solidify their respective bargaining positions.   

The tariff suspension also creates powerful incentives for those third countries to choose a side. The recently concluded US-UK framework agreement and ongoing US negotiations with other large trading partners (including India, Japan, Canada, Mexico, and the EU) is mirrored by ongoing Chinese efforts to solidify the economic heft and geoeconomic stature of the BRICS economies. South Africa, as president of the Group of Twenty (G20) this year, has maintained a studious silence. India’s negotiations with the United States display potential fissures within BRICS, even as Brazil and Russia increase their economic ties with China. 

The current global trade policy volatility thus ironically replicates the parallel structure of negotiations that occurred in Bretton Woods, New Hampshire, eighty years ago. The great powers of the day gathered in the Gold Room to strike what we today would call “plurilateral” deals that set the boundaries of the possible even as broader negotiations in plenary sessions proceeded in the ballroom. Both then and now, the great powers of the day engaged in straight talk and struck difficult bargains for the purpose of setting a new economic equilibrium. The composition of participants in today’s Gold Room may be different, but the negotiating dynamic remains the same. The outcome will also achieve the same overall purpose: to restructure the geoeconomic balance of power. One can only hope that the deals struck over the next few months prove to be as durable as the original Bretton Woods agreement. 

—Barbara C. Matthews is a nonresident senior fellow with the Atlantic Council. She is also CEO and founder of BCMstrategy, Inc and a former US Treasury attaché to the European Union. 

Whatever the outcome of talks, tariff unpredictability will reduce US trade dependence on China

There are three major takeaways from this morning’s announcement of a temporary agreement between the United States and China: First, it is added proof that the Trump administration’s trade policy is less about the tariffs per se (or decoupling, in the case of China) than it is about achieving the objectives behind the tariffs. These objectives include curbing nonmarket excess capacity and other nonmarket policies and practices, unfair trade barriers abroad, and the goods trade deficit. Broad tariffs are ready and powerful tools for achieving these objectives, but they are also crude ones that inflict self-harm and are therefore less desirable than other arrangements with equivalent effect.   

Second, trading partners that immediately started negotiations over these objectives instead of retaliating are in as good a position as, if not better than, China, which chose a hardline retaliatory stance. The former are in negotiations with the United States, as China is now, but without the severe economic harm inflicted by the retaliation in the interim.   

Third, the United States and China are now in a position similar to that before China received “permanent normal trade relations” status and joined the World Trade Organization, when the trading relationship was subject to the uncertainty of yearly most favored nation status renewal. There was significant trade between the United States and China in this period, but it was hobbled by the unpredictability of the tariff regime. Regardless of the ultimate outcome of this morning’s agreement in terms of tariff levels, the unpredictability in the tariff regime will continue to serve the Trump administration’s objective of reducing trade dependence on China. 

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He previously served as assistant US trade representative for Europe and the Middle East. 

The agreement is overshadowed by the possibility of abrupt change

The United States and China have agreed to reduce their respective bilateral tariffs on each other for the next ninety days, buying time to negotiate a trade deal. Essentially, the 145 percent tariffs the United States levied on China will be cut to 30 percent, and China’s 125 percent tariffs on US goods will be cut to 10 percent. The agreement has eased tension between the two countries and triggered major rallies in international equities, as well as the dollar, which had been under selling pressure.  

While the reduction of tariffs and commitment to negotiate a trade deal between the world’s two largest economies is to be welcomed, these steps have raised important questions for the international trading system. First, this deal together with the recent US-UK trade agreement have confirmed that the world has moved into a bilaterally managed trading system based on reciprocity—with no references to previously agreed multilateral rules nor the World Trade Organization. Second, the agreements were made in a rather casual manner, without being codified into trade treaties or national laws. This adds to the uncertainty about how robust and sustainable those agreements can be, as they are overshadowed by the possibility of abrupt change. Finally, even with those agreements, US tariffs on other trading counterparts will likely remain higher than before April 2025. It appears that the global 10 percent tariff rate will become the floor tariff rate on imports by the United States.  

Taken together, these developments elevate uncertainty, unpredictability, and complexity in the world trading order. They are likely to reduce trade volumes, especially shipments to the United States, which aims to cut its trade deficit. If trade among the rest of the world doesn’t increase enough to compensate, the decline in global trade will contribute to a weakening of global growth prospects. 

—Hung Tran is a nonresident senior fellow at the GeoEconomics Center and former IMF official. 

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In her traditional Global Policy Agenda speech, the IMF managing director, Kristalina Georgieva, sought to temper market anxieties and reassure member countries. She struck a tone of cautious optimism and underscored the Fund’s institutional preparedness while candidly acknowledging a range of serious global risks. She outlined three interlocking priorities to frame the week’s deliberations: (1) resolving trade tensions and restoring confidence, (2) safeguarding economic and financial stability, and (3) reviving medium-term growth through structural reforms.

Acknowledging the gravity of the moment, Georgieva stated, “We’re not in Kansas anymore,” a metaphor underscoring the unfamiliar and turbulent terrain the global economy now faces. She advocated for a comprehensive and coordinated settlement among major economies aimed at rolling back trade barriers, reducing policy uncertainty, and restoring the openness of global trade flows. She warned that prolonged ambiguity was already suppressing investment and eroding consumer confidence.

In this context, the IMF reiterated its longstanding position that both tariff and non-tariff barriers must be lowered to preserve multilateralism. However, the challenge extends beyond immediate trade disputes. Structural imbalances—including China’s elevated savings and weak domestic consumption, the United States’ sustained fiscal deficits, and the European Union’s incomplete economic integration—are increasingly viewed as drivers of systemic strain. To correct these asymmetries, the IMF recommended: (1) stimulating domestic demand in China, (2) advancing infrastructure investment and market integration in Europe, and (3) embarking on credible fiscal consolidation in the United States. The IMF portrayed these national adjustments as preconditions for global macroeconomic rebalancing and long-term resilience.

The second thematic pillar—economic and financial stability—highlighted the narrowing margin for error after years of policy stimulus in response to the pandemic, inflationary shocks, and geopolitical disruptions. Georgieva’s appeal to “get your house in order” captured the moment’s urgency. She urged countries to reinforce their fiscal foundations by implementing credible and transparent medium-term frameworks.

While she broadly encouraged gradual deficit reduction, Georgieva gave particular attention to low-income and emerging economies, which are confronting acute debt vulnerabilities amid tightening global financial conditions. For these nations, the policy agenda emphasized enhanced domestic revenue mobilization, improved public financial management, and proactive engagement with debt restructuring mechanisms. On the monetary front, Georgieva advised central banks to remain guided by incoming data and preserve their operational independence, while continuing to focus on price stability. The meetings also addressed mounting concerns over the stability of the financial system, including the risks posed by non-bank financial intermediaries, and called for more robust regulatory oversight and international coordination.

Finally, the IMF’s managing director placed renewed emphasis on the structural transformation needed to revive medium-term growth. As Georgieva declared, “Now is the time for long needed but often delayed reforms.” With global potential growth trending downward, she plainly acknowledged the limitations of monetary and fiscal policy.

Instead, discussions centered on national reform agendas tailored to each country’s specific institutional context. These included measures to improve the business climate, enhance governance and the rule of law, modernize labor and product markets, and strengthen innovation ecosystems and digital capacity. For emerging and developing economies, the imperative to expand access to finance, invest in human capital, and build sustainable infrastructure was seen as crucial to catalyzing private sector participation. Climate resilience and inclusive growth were integrated into the broader reform discourse, reflecting the growing consensus that sustainability must be embedded in long-term economic strategy. The IMF committed to supporting member countries in these efforts through targeted instruments—such as the Resilience and Sustainability Trust—alongside bespoke policy advice and capacity development.

A pivotal intervention during the meetings came from US Secretary of the Treasury Scott Bessent, who addressed the Institute of International Finance with a call for the IMF to return to its original mandate. He criticized the Fund’s perceived “mission creep” into areas such as climate, gender, and inequality. He acknowledged these issues as important, but potentially distracting from the IMF’s core objectives of macroeconomic stability, balance of payments support, and monetary cooperation. Bessent reaffirmed US support for the Fund and the World Bank, while clarifying that continued engagement would hinge on institutional discipline, rigorous program conditionality, and a sharper focus on correcting global imbalances. His remarks signaled not just a recalibration of US expectations, but a broader ideological debate over the role of multilateral financial institutions in a fragmenting global order.

Georgieva’s response the following day was diplomatically calibrated. In an April 24 press briefing, she welcomed continued US engagement and described Bessent’s comments as constructive. “The United States is our largest shareholder… of course, we greatly value the voice of the United States,” she remarked, interpreting the speech as a reaffirmation of US commitment at a time when political rhetoric had raised fears of disengagement. She acknowledged the legitimacy of US concerns and noted that ongoing institutional reviews—including the Comprehensive Surveillance Review and the Review of Program Design and Conditionality—would serve as venues for deeper discussions. These mechanisms, she suggested, provide space to reexamine priorities, refine programs, and ensure alignment between the Fund and its major stakeholders.

But what do US concerns about the IMF’s direction truly entail, and how might they be addressed in the upcoming policy reviews? It is crucial to recognize that, despite holding over 16 percent of the Fund’s voting power, the United States cannot unilaterally block the IMF executive board’s approval of the regular Comprehensive Surveillance Review. This implies that the most consequential negotiations will, as is customary, occur informally and behind closed doors. We can anticipate that the US executive director’s office will try to shape a draft document that aligns with Washington’s preferences.

However, the United States is not the only influential voice at the table. Other member states—many of whom have divergent priorities, particularly on issues such as climate integration, social inclusion, and the future scope of macroeconomic surveillance—will also seek to assert their positions. The previous surveillance review in May 2021 introduced climate macro-criticality into Article IV consultations for the twenty largest greenhouse gas emitters. Whether the United States can successfully build a broad coalition to revise the surveillance framework in line with its renewed emphasis on “core” macroeconomic fundamentals remains to be seen.

Yet despite the Spring Meetings attendees’ efforts to project cohesion and forward momentum, the underlying global outlook remains clouded by persistent uncertainty. Geopolitical tensions, rising debt burdens, and diverging monetary policy trajectories continue to weigh on policy coordination platformed by the IMF.

As attention shifts toward the 2025 annual meetings this October, critical questions will come into sharper focus. Can the IMF meaningfully recalibrate its surveillance priorities? Will members find the political will to realign quotas and governance structures? How will the Fund balance its evolving role with the demands for institutional discipline? These meetings will not merely be another milestone in the global economic calendar—they may well constitute a stress test for the resilience of the postwar international system and its ability to adapt in an increasingly complex, multipolar world.

Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

The views and opinions expressed herein are those of the author and do not reflect or represent those of the US government or any organization with which the author is or has been affiliated.

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Twelve years after his own surprise election, how much did Pope Francis actually succeed in reshaping the church’s leadership? Here’s one way to look at it.

To understand the Church’s shifting priorities amid an evolving Catholic demography, we compared the economic profiles of the cardinal electors who selected Pope Francis in 2013 and Pope Leo’s 2025 conclave. This time, around 32 percent of Cardinals in the conclave came from countries in the bottom half of world gross domestic product (GDP) per capita, a notable rise from around 22 percent in 2013. Under Francis’s pontificate, the profile of the “median cardinal elector” shifted towards lower GDP per capita nations by 12 percentage points. Still, the majority of electors hail from middle to higher-income countries, partly reflecting the geographic concentration of the world’s 1.4 billion Catholics.

This shift among the cardinal electors mirrors the broader trend: the Catholic Church’s growth, and thus its future, is increasingly in emerging economies. In Africa and Asia, the Catholic population has expanded faster than their overall population growth, while North America experiences slower growth and Europe a reversal. Pope Leo XIV will have to continue adjusting to the Church’s new demographic reality.

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April 23, 2025

Banque de France’s François Villeroy de Galhau on strengthening Europe

Banque de France Governor François Villeroy de Galhau discussed the challenges of safeguarding the euro amid global economic uncertainty with Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center.

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Transcript of remarks

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Thanks to all of you for welcoming me in the Atlantic Council. We sit just a few blocks from Franklin Park and Lafayette Square. And if necessary, Washington’s geography reminds us of the enduring bond between our two nations.

As the Marquis de Lafayette, probably as famous in the US as in France, hero of the two worlds, once wrote to George Washington, I quote him: “Humanity has won its battle. Liberty now has a country.” From the very start, the cause of liberty, of freedom, has been one we have carried together, across the Atlantic, and I strongly wish it is still today, despite very troubled waters we are sailing through.

Let me also remind you with gratitude that Dean Acheson, who played a key role in the creation of your Atlantic Council, was also instrumental in the early steps of European integration. This is perhaps less well known, but he urged the French government in 1949 and 1950 to take the bold step leading to the Schuman Declaration of 9th of May 1950, and hence of what would become the European Union.

For Dean Acheson, as for many Americans, the EU was not designed, and sorry for the quotation, was not designed to “screw the US,” on the contrary. And let me, by this opportunity, also pay tribute to his French counterpart, Robert Schuman, at that time French Foreign Affairs Minister. He came from the French-German border, Jenna, which you alluded to, and it’s a legacy I feel personally connected to, having grown up like him in that very region where our two nations meet.

Hence, I will highlight that the transatlantic partnership has been so far strong and balanced, as no other worldwide. Second, nevertheless, the US trade policy shift will harm the global economy, starting at home. Lastly, and more positively, I will trace out a path for this possible European moment you mentioned, if, I stress, if we seize the opportunity.

Let me try to state the obvious first, but telling the truth means sometimes reminding the obvious at present. The US and the EU are the world’s two largest economies, maintaining one of the largest bilateral economic relationships. Then there is this question of the trade surplus.

Let me give some figures. If I look at the surplus in goods, obviously, there is a European surplus of $234 billion. But there is a services deficit which has significantly widened in the last years and which is at the advantage of the US for $125 billion. If I add a third element, which is a net primary income flows in favor of US firms, this leads ultimately to a balanced current account.

Can I also add that the effective applied tariffs between the EU and the US were close before recent developments, 3.95 percent for the EU on US products, 3.5 percent for the US on European products. Let me remind also the obvious: Value-added tax, VAT, is not a customs duty. It is levied on the final value of imported and domestically produced goods equally like the sales tax in the US. And nobody would argue in Europe that the sales tax is a customs duty.

European majority-owned affiliates directly employed an estimated [5.3 million] US workers in 2023, and European-based investors represent close to 50 percent of all foreign holdings of US securities that same year.

Last figure, and I will stop there, but only to show how deep, old, and balanced our relationship is: Today, 120,000 European researchers are working in the US universities, labs, and firms.

I must unfortunately go to my second point about the US policy shift and its harmful consequences.

Let me be honest: I don’t mean that the latest globalization wave was a fairy tale. It had its problems. It had its imbalances, both social and financial. But the current lose-lose game will obviously increase these problems and in no way solve them. The new trade measures, tariffs announced, as well as the increasing unpredictability which affects confidence, constitute without any doubt a major negative shock, and self-indicted, to the global economy, but first and foremost, to the US economy. I say that with sadness.

According to all analyses by most US and international banks and yesterday by the IMF, the American economy could suffer this year from an average estimated loss of around 1 percentage point in annual growth less and a similar-sized, 1 point rise in underlying inflation. There could even be a US recession, which was unthinkable, unthinkable, three months ago. But bad news for the US is bad news for all, including for Europe.

According to our preliminary assessments, there could be a direct negative impact of 0.25 percent to euro area GDP growth this year. The impact on inflation remains more uncertain but could be as a whole on the downside. And this is a significant difference; our inflation would diminish while the US one would increase. That said, our baseline scenario for France and the euro area remains that of an exit from inflation without a recession.

Financial markets, as we all know, they reacted very negatively to these trade announcements with a very unusual combination—let me stress that—of a sharp drop in US equity indexes, a rise—very surprisingly—in US long term bond yields, and a broad-based decline in the US dollar. The economic uncertainty may possibly threaten financial stability. I say it with some gravity. And I add that such deeply disruptive effects would also result from attacks on the independence and credibility of central banks. Let me on this occasion express again my gratitude to Fed’s Chair Jay Powell, who admirably shows how a central banker must behave.

One word about monetary policy, if you allow me. Independent from political impatience, our monetary policies are also autonomous from one another across the Atlantic. This in no way precludes—and this is my commitment to you—this in no way precludes a continuous, trusted, and indispensable dialogue, which is more necessary than ever for global financial stability.

But this autonomy is precisely what allows each of us to fulfil our domestic price stability mandate. In Europe, this is made possible by one of the greatest institutional achievements of the [1990s]: the creation of the euro. I am old enough, I must confess, to have been personally in Maastricht thirty-three years ago, and much more recently, I was in Frankfurt last week, for our latest decision to cut interest rates.

There is currently, as I said, no inflationary risk in Europe. And we can almost say “mission accomplished” when it comes to bringing inflation back to our 2 percent target. The significant deceleration of wages is another proof thereof. It is therefore both fair and appropriate that, compared to the US Fed or the Bank of England, the ECB has started cutting rates earlier—last June—faster, and likely further this year.

While this supports activity in the short term, the key to strengthening European growth remains structural through a broader mobilization of our internal resources.

And this brings me to my last and more positive considerations about Europe. Can I first say hope that we use the ninety-day pause to seriously talk across the Atlantic.

The least economically harmful option would be indeed to negotiate and then deescalate the situation rather than setting off a transatlantic spiral of tariff hikes. So far, Europeans, and you could witness it, Europeans have reacted in a remarkably united and calm manner.

Furthermore, I strongly wish Europe and the US can still commit together to what I call a pragmatic multilateralism. I mean a pragmatic multilateralism that is focused on some practical themes of common interest.

Let me name just a few: financial stability, cross-border payments and crypto-assets, cybersecurity, or the fight against financial crime and the prevention of extreme climate events. I insist: Let us resolutely preserve and support the multilateral institutions such as the IMF and World Bank, born and hosted in this great country—and this great city of Washington.

Let me express one final hope. If this difficult current situation has a silver lining, it is to possibly usher the European moment: Europe, despite its limitations—and we are aware of these limitations—as a safe haven of economic predictability and confidence, of rule of law, of social cohesion. But this will not happen without bold moves.

We can already see the impressive shift of the next German government. And these moves are obvious on defense, but let me focus today on economy, as the other pillar of this European moment. We need what I would call a “general mobilization” focusing on three imperatives, three “I”s, taking the best of the impressive economic success of America—or if you prefer, rather than three “I”s, size multiplied by muscle multiplied by speed. What do I mean? And I will be very short, but this is a sum up of the Draghi report, so to say—four hundred pages.

First, we need to integrate, the first “I”, the single market more. This means making the most of its size—as large in GDP terms as the US—by removing internal barriers in several areas such as services and energy. We also need, second “I”, to invest better, giving priority to the most promising breakthrough innovations, particularly those related to AI. And to succeed there, we need to build financial muscle through a genuine Savings and Investments Union, fostering more our abundant private savings—we don’t lack private savings, no the contrary—but we must force them towards equity and venture capital, again, US type. And third “I”: We need to innovate faster. Europe needs simplification, obviously. Less bureaucracy, fewer procedures, and shorter deadlines, while stressing—and this is one of our messages—that simplification is not deregulation, and we will come back to that.

Can I add a general consideration on this European agenda and this European moment: To successfully implement these three “I”s, these three imperatives, we urgently need a binding, visible, and not too distant calendar: Such a calendar will mobilize all our political and economic forces, as did in the past the 1st of January 1993 for the single market, also 1st of January 1999 for the single currency.

Let me conclude, in quoting the great French writer Victor Hugo. He wrote, almost two centuries ago, “A day will come when there will be no other battlefields but markets opening to trade and minds. . .  A day will come when these two great groups, the United States of America and the United States of Europe, will stand face to face, reaching out across the seas, exchanging their products, their commerce, their industries, their arts, and their genius.”

That day, alas, has grown more distant in recent times, but we need such nice utopias. The transatlantic sky has darkened considerably. But even in the storm, we must not lose sight of our long-term course. You, the American people, will decide what must be said and what must be fought for on your side of the Atlantic, as loud and clear as necessary. As Europeans, our task is clear: to strengthen our own side of the ocean. Let us, in the very name of the Atlantic spirit this Council embodies, let us seize the European moment.

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“America’s present need is not heroics but healing,” Harding said, “not nostrums but normalcy; not revolution but restoration; not agitation but adjustment; not surgery but serenity; not the dramatic, but the dispassionate . . . ” 

It was certainly unintentional, but I heard echoes of Harding when Valdis Dombrovskis, a Latvian who serves as an executive vice president for the European Commission, came to the Atlantic Council yesterday in defense of “boring” predictability.  While mentioning US President Donald Trump only once in his opening remarks, he underscored what Europe has long seen as its shared virtues with its American partners.  

“You see our fundamental values, individual liberties, democracy, and the rule of law often painted as weakness by authoritarian regimes to prey upon,” said Dombrovskis, who previously served as the European Union’s (EU’s) trade negotiator and is one of Europe’s longest-serving commissioners.* “However, in times of turmoil, predictability, the rule of law, and willingness to uphold the rules-based international order become Europe’s greatest assets. We are committed to doing whatever it takes to defend our ‘boring’ democracies, because boring brings certainty and a safe haven when a rules-based order is questioned elsewhere. Our processes allow for debates and consultations to take place, building buy-in from our key stakeholders and enabling us all to pull in the same direction.”

This week’s meetings of the International Monetary Fund (IMF) and World Bank in Washington, DC, are arguably the most important since the financial crisis of 2008-2009, because the Trump administration is seeking fundamental changes to the world trading and financial system not seen since the Bretton Woods agreement of 1944. In that year, the United States and its partners brought down protectionist trade barriers, established a new international monetary system, and laid a foundation for post-World War II global economic cooperation. One of the results was the creation of the IMF and the World Bank.

The last thing the Trump administration appears to want is a return to the normalcy of the eighty years that followed that agreement, arguing that the United States has been taken advantage of by its trading partners and that international system. One can say many things about Trump’s first hundred days in power, but “boring” certainly isn’t one of them.  

Many of the world’s economic elites in town for this week’s IMF-World Bank meetings appear to be yearning for the first Trump administration, during which the rhetoric was often more extreme than the policies that emerged. Investors appear to agree with them, driving up markets Tuesday when Trump said that he wasn’t planning on removing Federal Reserve Chair Jerome Powell from office and US Treasury Secretary Scott Bessent signaled that the United States wanted a trade deal with China.

Yesterday brought fresh reports, most notably in the Wall Street Journal, of Trump’s willingness to dial back China tariffs, while Bessent had harsh words for China’s export-driven economic model even as he hinted at a deal. “China needs to change,” he told the Institute of International Finance. “Everyone knows it needs to change. And we want to help it change—because we need rebalancing too.” 

As I’ve argued previously in Inflection Points, the Trump administration this time around is more determined to bring about lasting changes than most investors and trading partners recognize. “The revolution,” I wrote, “is about breaking what Trump administration officials believe needs to be fixed, whether it is foreign assistance or international trade, because previous experience has shown that reforms aren’t possible.”

In his Atlantic Council remarks, Dombrovskis showed that he understands the European status quo also needs to change, but that it should be achieved by building upon the rules-based system that has served it so well since World War II. 

He spoke of accelerating efforts to build European defense and about the need to support Ukraine against Russian aggression as “Ukraine is central to Europe’s security considerations.” He spoke about deepening the European single market (“our main economic asset”) of 450 million consumers and about tackling “a longstanding problem of bureaucracy and red tape” by reducing administrative costs for European companies by 25 percent.

He also spoke about expanding the EU’s growing network of economic partnerships and about tapping growing international demand for euro-denominated assets. First and foremost, he played up European predictability as a core strength. What was understood, but not said, was that the EU now sees its “boring” predictability as a competitive advantage when measured against the United States.

Make no mistake: the EU would much prefer to do a damage-reducing deal with the Trump administration, but Dombrovskis’s tone was that of someone who knows he’s entered a time of transatlantic uncertainty when that’s not an outcome he can bet on.

The wording Dombrovskis chose was telling, saying that the EU “isn’t giving up on our closest, deepest, and most important partnership,” with an economic and trade relationship of $9.5 trillion per year, including a services trade estimated at $475 billion in 2024.

He spoke about the EU’s readiness to buy more US liquefied natural gas and offered to negotiate down to zero tariffs on all industrial goods. At the same time, he reminded the audience that the EU would escalate, if necessary, and that a first, 21-billion-euro package of countertariffs was put on hold following the Trump administration’s ninety-day pause on its own “reciprocal” tariffs.

Dombrovskis’s message was a clear one: that the EU “is determined not to let this crisis go to waste,” and it wants to make “inroads to help shape new strands of the global economy.” As for how the EU can reach a deal with the country that was both the host and at the heart of the Bretton Woods agreement eighty years ago, he regretted that “so far we also don’t have clear responses” to EU offers on a path forward.  

It’s far too early to know whether “boring” can win the day and whether American voters will return to Warren Harding territory. That said, Dombrovskis yesterday laid out a sound—and even compelling—approach for a continent where rules-based international order has been an antidote to its bloody past.

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X: @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

Note: An earlier version of this article inaccurately referred to Dombrovskis as the EU’s current trade negotiator. This essay has been updated to note that he is a former EU trade negotiator, as Dombrovskis left that position in December 2024.

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Laissez-faire economics is out; less-than-it-was economics is in. On Tuesday, the International Monetary Fund (IMF) released its latest World Economic Outlook (WEO), which cut its projection for global growth in 2025 to 2.8 percent, down from 3.3 percent in its January forecast, with US growth now pegged at 1.8 percent, down from 2.7 percent. Driving a significant part of these downward revisions are US President Donald Trump’s tariff announcements, along with the associated policy uncertainty and push toward protectionism globally. “We are entering a new era,” the IMF’s chief economist said, as the “global economic system that has operated for the last eighty years is being reset.” Below, Atlantic Council experts at the IMF-World Bank meetings this week in Washington delve into the details and explore what it all means.

• Josh Lipsky (@joshualipsky): Senior director of the Atlantic Council’s GeoEconomics Center and former adviser to the IMF
• Jeremy Mark (@jedmark888): Nonresident senior fellow at the GeoEconomics Center and former IMF communications specialist
• Elizabeth Shortino: Nonresident senior fellow at the GeoEconomics Center and former US executive director at the IMF
• Martin Mühleisen (@muhleisen): Nonresident senior fellow at the GeoEconomics Center and former IMF official

Prediction problems

• Predicting the economic future is difficult any time; even more so now. Josh points out that just last week, US Federal Reserve Chair Jerome Powell said “there isn’t a modern experience of how to think about this,” underscoring the difficulty in modeling the global impacts of the Trump tariffs. The new WEO is important, Josh adds, because in effect “the IMF said, ‘We’ll give it a try.’”
• That said, the IMF does hedge somewhat by offering three scenarios. Jeremy notes that the IMF officials focused on WEO’s “reference forecast,” which sees a 0.5 percentage point reduction in global output for all of 2025 when calculating the impact of all of Trump’s tariffs this year through “Liberation Day,” without the subsequent pauses. And it could turn out to be even worse than that, Jeremy adds, since some economists see IMF projections as “too inclined to accentuate the positive”
• “The recent rapid trade and market developments make it next to impossible to produce a reliable baseline forecast for global growth,” says Elizabeth. “The IMF also had to walk a fine line in assessing the impacts of US actions without too overtly criticizing its largest shareholder. Not an easy task on both counts.”

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Certain about uncertainty

• The word “uncertainty” appears more than one hundred times across the WEO and its companion document, the Global Financial Stability Report, Elizabeth notes. “This message is on point, as uncertainty abounds and poses its own strains on the global economy.” 
• What does this uncertainty look like? In the United States, further stock market declines, higher interest rates, and exchange rate fluctuations have the potential to create “significant shocks that could destabilize financial markets,” Martin says. At the same time, the WEO states that a resolution of the tariff conflicts or an end to the war in Ukraine could provide a major boost to the global outlook. 
• And yet, Martin says, “there should be no illusion about the risks facing the world economy, reminiscent of the last financial crisis, and continued uncertainty on tariffs and other policies risks moving markets closer to the abyss.”
• Those risks come out even more when you dig below the headline numbers. Jeremy notes that the projections of 4 percent growth for China this year and next year “probably won’t go over well in Beijing,” since they are below official figures. Elizabeth points to “a more dire scenario” for global growth nestled in the WEO if the United States extends the Trump first term tax cuts, China’s domestic demand continues to lag, and Europe’s productivity does not grow.

A recession by any other name

• Could the world be headed for a recession? Josh points out that the IMF is not projecting a global recession this year, even though the risk has increased. Moreover, Josh adds, what would qualify as a global recession is different from a recession in a single country, which is generally two consecutive quarters of negative growth. 
• “When I was at the IMF, there was a debate about whether GDP growth under 2.5 percent would constitute a recession,” says Josh. “It seems like today the IMF has made a determination about what this looks like in the current situation—2 percent GDP growth—although they call it a global economic downturn.”
• Josh will be paying close attention to how IMF Managing Director Kristalina Georgieva answers the recession question in her Thursday press conference: “Just because the global economy isn’t in a recession by the IMF’s standards at the moment, it doesn’t mean in a few months we won’t cross the mysterious threshold.”

New Atlanticist

Apr 20, 2025

Inside the IMF-World Bank Spring Meetings as leaders navigate the global trade war

By Atlantic Council experts

Amid an economic climate of great uncertainty, we dispatched our experts to the center of the action in Foggy Bottom to share their biggest takeaways from a pivotal week for the global economy.

Inclusive Growth International Financial Institutions

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Those projections were released at the IMF-World Bank Spring Meetings, where central bank governors, finance ministers, and other economic leaders met. There, many sounded the alarm about the global economy’s trajectory and discussed their plans to cushion their countries from the blow of low growth and high inflation, which are expected to result from US President Donald Trump’s sweeping tariffs.

Amid an economic climate of great uncertainty, we dispatched our experts to the center of the action in Foggy Bottom to share their biggest takeaways from a pivotal week for the global economy. Read what they want you to know below.

This week’s expert contributors

APRIL 26 | 12:01 PM ET

“Those who seek to deconstruct the system… have an obligation to share the vision of what comes next”

Wrapping up the week, GeoEconomics Center Senior Director Josh Lipsky, who is also the chair of international economics at the Atlantic Council, reflects on the founding of the Bretton Woods institutions and calls for visionary leadership to shape what comes next.

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The US dollar has been the global reserve currency for approximately a century, and we can sit here as we did this week and talk about all the macroeconomic factors of why that is—liquidity and capital markets and all the ins and outs that make something a reserve currency or not.

But the fundamental reason something becomes a reserve currency, the world’s leading experts on currency will tell you, including at the Atlantic Council, is the rule of law.

But another way to say that is trust: Trust that, fundamentally, you will be treated fairly, there will be a process if there’s a dispute, that you understand the system, how it works, and how it doesn’t. That trust was hard fought for and hard won by the United States.

We often romanticize the three weeks in New Hampshire in 1944, as when the world came together and set out a new international economic order and created the dollar as the global reserve currency. But the truth is much more complicated. There was wrangling and backstabbing and negotiation and suspicion, countries not wanting to deal with each other, bilateral negotiations just like we see this week.

And what emerged from that meeting was not a consensus. It was a precarious and tenuous agreement to see if the United States, as the leader of an international economic system, could earn the trust of the world. And they did it.

The United States did something that no superpower in the history of the world had ever done before. They shared their power. They built a rules-based international system, and that system benefited the world, but it also benefited the United States. It generated enormous prosperity in this country.

We overlook that history at our own peril. Are there deep flaws in that system? Of course, there are. Have they built up, especially in the past twenty, thirty years to the detriment of American workers and workers around the world in advanced economies? There is no doubt. Is reform needed? Of course, there is absolute unity across the IMF and World Bank about the need for reform.

But those who seek to deconstruct the system that was built over nearly a century have an obligation to share the vision of what comes next.

This world that we have built, this economic order, is imperfect. But it represents the consensus of the citizens of the countries that these ministers and governors represent. And the brilliance of this system is that every country has a voice.

And working together, they build a stronger global economy. We may have forgotten those lessons as a century has moved on, and it may be painful for all of us as we seek to relearn them. But we have to come out of the other end of this, not just in a bilateral world, the way we operated before the Bretton Woods system, but a way that shows we have learned and not forgotten the lessons of history. That is what we will be committed to at the Atlantic Council, and that is what we will continue to work on in the days, weeks, and months ahead.

APRIL 26 | 11:24 AM ET

Thanksgiving in April

Last year at the Annual Meetings, my colleague Martin Mühleisen likened these gatherings to Thanksgiving, as both ‘sides’ of the family come together in good spirits—though there may be a kick under the table. On this, I agreed, noting there is meaningful cooperation, collaboration, and respect between the IMF and World Bank.

Despite the overarching sense of gloom at these Spring Meetings, as the trade war heightens economic uncertainty, there were encouraging signals that much-needed coordination and partnership between these two institutions and beyond can and is happening.

For example, take domestic revenue mobilization and debt, two connected challenges listed prominently on the agenda. That’s the case for good reason: Emerging market and developing economies collectively face a financing shortfall in the trillions. As I discussed on Tuesday with the French Treasury’s William Roos, who is also co-chair of the Paris Club, these countries lack fiscal space to invest in growth or climate resilience, mainly due to declining development assistance and hamstringing debt (at least half of these countries are in or at high risk of debt distress).

The implications for macro stability, economic development, and poverty alleviation give both the Bank and Fund a shared interest in prioritizing action. They have similar tools at their disposal—financing, concessional lending, trust funds, policy advice, and capacity building. But too often these tools are utilized in isolated, fragmented, and (at times) even counterproductive ways.

This is why joint efforts such as the IMF-World Bank Debt Sustainability Framework for Low-Income Countries and the Domestic Resource Mobilization Initiative are so critical. So is the new, much-anticipated “Playbook” for debt restructuring released on Wednesday by the Global Sovereign Debt Roundtable, which the Fund and Bank co-chair along with the Group of Twenty presidency. Ceyla Pazarbasioglu—the director of the Strategy, Policy, and Review department at the Fund—got giddy discussing these collaborations with Pablo Saavedra, vice president of Prosperity vertical at the Bank, and me.

As much as ongoing and strengthened coordination between these two institutions is important, I am even more encouraged by what I heard from them and others, on and off the 19th Street campus, and in front of cameras and behind the scenes. The people I spoke with acknowledged the need to revisit the broader international financial system for better cooperation (including with regional international financial institutions), improved ownership of national policies by and alignment with governments, and ultimately more effectiveness in an era when everyone has to do more with less. Keep an eye out for momentum that can and should enable progress, not only in the lead up to the Annual Meetings in October but also ahead of the fourth Financing for Development Conference in Seville this summer. If you’re curious about what that will entail, watch my conversation with United Nations Assistant Secretary General for Economic Development Navid Hanif and Ambassador of Zambia to the United Nations Chola Milambo.

APRIL 25 | 6:27 PM ET

Dispatch from IMF-World Bank Week: Success, in one underappreciated way

In the meetings and panels I attended this week, the air was thick with existential dread over the Bretton Woods institutions’ very future. Delegates came prepared for the worst, bracing for a difficult set of discussions with the new US administration.

Considering the expectations for these meetings were so low, I would say they wound up a qualified success. The mood had already improved after the United States supported an IMF deal with Argentina, struck the week before, and after US Treasury Secretary Scott Bessent delivered a speech providing reassurance that the United States values the Bretton Woods institutions—as long as major reforms are undertaken.

Even though most people focused on the gloomy outlook for the world economy over the course of the week, some gave in to guarded optimism as markets stabilized on the hope for a US stand-down on several trade fronts.

The shift in mood wasn’t the only sign of success; there were concrete deliverables. One came from the Global Sovereign Debt Roundtable, which issued a roadmap for debt restructuring negotiations, signaling important consensus among major creditor countries. Moreover, the IMF and World Bank announced that they will engage with the new Syrian government to help restore their country’s war-damaged economy.

In addition, the statement by the International Monetary and Financial Committee chair (issued in lieu of a communiqué) struck a tone that was clearly aimed at addressing the United States’ stringent demands—although it did not give any indication of how the IMF would do so, and the real work still lies ahead.

Despite these positive signals, the global financial system faces considerable uncertainty. The Argentina program is a risky bet, the Trump administration could switch its view on the Bretton Woods institutions, and there is now a bigger question mark attached to the dollar’s future as the world’s dominant currency.

This week proved the value of IMF-World Bank meetings in troubled times. In speaking at Atlantic Council headquarters on Thursday, Spanish Finance Minister Carlos Cuerpo told us that the most important deliverable this week, with difficult decisions looming over the next few months, was simply for people to keep “talking to each other.” I couldn’t agree with him more.

APRIL 25 | 3:48 PM ET

The actions needed to support those who are financially underserved in Africa

At World Bank headquarters, the Atlantic Council’s Ruth Goodwin-Groen sat down with Admassu Tadesse, president and managing director of the Trade and Development Bank Group, to talk about the absence of venture capital in Africa and the need to promote inclusive finance.

APRIL 25 | 3:02 PM ET

Egypt’s Rania Al-Mashat on navigating today’s global shocks

APRIL 25 | 1:57 PM ET

This week shifted our understanding of everything from dollar dominance to trade wars

This week’s IMF-World Bank Spring Meetings have only highlighted that no one is coming to save the global economy. There is no rescue committee, no stimulus plan, and no quick Fed cuts around the corner.

Most of the ministers knew this was the state of affairs coming in. But it’s one thing to talk about a trade war. It’s another to see the IMF cut the growth forecast for nearly every country in the world because of a single policy decision.

In the beginning of the week, I sensed gloominess and anxiety in the hallways and in our private conversations with finance chiefs. But by the end, I noticed something else, the same thing I remember back in 2008 during the financial crisis: a steely sense of resolve. These leaders understood that at some level, the tariffs are here to stay, trade deals would take months or longer, and the global economy is being restructured.  It would be, as one minister said privately, just something we have to weather.

That’s true, but how bad will the storm be? No one knows. That doesn’t mean this week didn’t offer clarity, however. Our team walked away from these meetings with a transformed understanding of three issues:

1. There’s a difference between wanting dollars and needing dollars. The dollar’s status as a reserve currency is safe for the time being. That’s what Bloomberg’s Saleha Mohsin told me in our conversation, and she brought the data to back it up. But while the world still needs dollars for a functioning global economy, there were many people this week who wouldn’t mind finding some plan Bs. Do they exist? Not exactly. The European finance chiefs we spoke to were skeptical that a move to the euro would stick—and some, such as the Banque de France governor, weren’t sure it was a good thing given it was a result of instability in the United States, not a vote of confidence in the euro area.
2. The Trump administration is as focused on the IMF as it is on the World Bank. There was chatter going into the week that the administration was more focused on putting pressure on the World Bank than the IMF. But US Treasury Secretary Scott Bessent, in a speech on Wednesday, spent as much time—if not more—talking about the Fund going beyond its mandate than he did on the Bank lending to China. That surprised many, and it means there are fights ahead as the IMF—and the Bank—tries to respond to its largest shareholder in the months ahead without alienating the other 190. Considering the Trump administration has an end-of-July review deadline to decide its policy on US involvement in international organizations, the eighty-first anniversary of the creation of Bretton Woods institutions (July 22) could be one of the most significant since their founding.
3. Emerging markets and developing economies are already getting hit hard. Our conversations made it clear that a range of countries across regions is already feeling the impact of the trade war and economic slowdown in the form of job loss and increased poverty rates. These countries are going to need assistance from the IMF and World Bank in the near future. Even if the US president reversed his policy and slashed tariffs back down as soon as tonight, that wouldn’t fix the problem. It’s the volatility that feeds the uncertainty that pulls back investments. As the old saying goes, trust arrives on foot but it leaves on horseback.

APRIL 25 | 11:03 AM ET

The Bank of England’s Megan Greene: On tariffs, the “risk is now on the disinflationary side”

APRIL 25 | 10:15 AM ET

Slow progress on debt restructuring

Amid the week’s focus on trade tensions and economic uncertainty, the lingering issue of developing country debt has received little attention. However, reports released on Wednesday by the IMF and World Bank’s Global Sovereign Debt Roundtable (GSDR) suggest that the frustratingly slow process of restructuring unsustainable debts—a problem that took center stage amid the economic dislocations of the COVID-19 pandemic—has made important, albeit incremental, gains over the past few years.

A handful of countries have passed through the restructuring process, most of them low-income economies whose debts were supposed to be addressed by the Group of Twenty governments’ Common Framework for debt “treatment.” But some other nations—notably Sri Lanka—did not fit within that framework. What has emerged has been a case-by-case process in which government and private-sector lenders have worked through complex roadblocks, many of which were posed by the world’s largest sovereign lender, China.

The GSDR co-chairs’ Progress Report lays out many of the nuts-and-bolts issues that have been addressed, ranging from “comparability of treatment” across different creditor groups to the restructuring of “non-bonded commercial debt,” which generally means bank loans. It also lists several areas that need to be addressed going forward, including how to enhance coordination of private-sector creditors.

While the reports are careful not to point fingers at any specific lenders, the reality is that many of the issues before the roundtable have been posed by China, which is loath to take write-downs on its massive portfolio of loans. Beijing’s position on these issues has at times been opaque, but a recent paper put out by the Harvard Kennedy School usefully illuminates much of the back and forth that has taken place during the recent restructurings—as well as the work that remains to be done.

APRIL 25 | 9:17 AM ET

Catch up with everything happening at the Atlantic Council on day five

Dispatch from IMF World Bank Week: Why surveillance matters

Why Europe being a “safe haven” for the world is “good news for everyone,” according to Spanish Finance Minister Carlos Cuerpo

Greece’s Kyriakos Pierrakakis: “Unless you create positive tailwinds, you cannot counter the negative headwinds”

Experts and leaders focusing on Central and Southeastern Europe discuss the challenges facing the region

Catch up with everything happening at the Atlantic Council on day four

A common tone among key leaders is a sign for optimism

In defense of “boring”: A European leader’s message to Trump

Read day three analysis

APRIL 24 | 7:57 PM ET

Dispatch from IMF World Bank Week: Why surveillance matters

This morning, I watched as IMF Managing Director Kristalina Georgieva unveiled her Global Policy Agenda (GPA), a biannual document that outlines the managing director’s vision for the IMF’s work over the coming year.

 The most notable part of this year’s GPA is its focus on surveillance—in other words, the IMF’s work to assess the economic health of its members. As part of that focus, the GPA discusses the Comprehensive Surveillance Review, the IMF’s way of setting priorities and updating its processes for conducting bilateral and multilateral surveillance. There are some things to applaud in the outline for the upcoming review, including the emphasis on the IMF’s core areas of expertise: fiscal, monetary, and financial issues—and, most importantly, the persistent theme of external imbalances. 

However, some will not applaud the fact that there were few passing references to climate and no mentions of gender, despite the IMF having increased its budget for these and other emerging topics within the past few years. The GPA proposes instead “adapting surveillance” by setting principles around the topics to be covered. This approach aligns well with US Treasury Secretary Scott Bessent’s remarks from yesterday that the IMF has suffered from “mission creep.” But European partners will no doubt have concerns that the Fund is abandoning its climate strategy, approved just four years ago.  

My own view is that the GPA’s focus on surveillance is a welcome departure from the past. Surveillance may not get as many headlines as the IMF’s lending programs, but it provides an enormously valuable public good, particularly in those countries that do not receive regular market coverage. The IMF’s policy advice can also steer bilateral and multilateral donors and their efforts to prioritize assistance.

Watch this space closely to see whether the Comprehensive Surveillance Review delivers concrete reforms and real modernization efforts to help serve both advanced and developing economies.

APRIL 24 | 4:38 PM ET

Why Europe being a “safe haven” for the world is “good news for everyone,” according to Spanish Finance Minister Carlos Cuerpo

APRIL 24 | 2:56 PM ET

Greece’s Kyriakos Pierrakakis: “Unless you create positive tailwinds, you cannot counter the negative headwinds”

APRIL 24 | 1:42 PM ET

Experts and leaders focusing on Central and Southeastern Europe discuss the challenges facing the region

APRIL 24 | 9:22 AM ET

Catch up with everything happening at the Atlantic Council on day four

APRIL 24 | 8:43 AM ET

A common tone among key leaders is a sign for optimism

All things considered, the IMF-World Bank Spring Meetings are generating surprisingly optimistic and positive messages. 

Weeks of policy volatility, market volatility, and much hand-wringing over the Trump administration’s stated effort to reconsider the multilateral arrangements laid the groundwork for a tempestuous set of meetings. Yet we are just past halftime with no existential crisis (yet) at the IMF or the World Bank.

At this point, the European Commission, World Trade Organization (WTO), and US Treasury have all spoken publicly. They may not have been singing from the same sheet music, but they were all certainly singing in harmony.

EU Commissioner Valdis Dombrovskis, speaking at the Atlantic Council, said that the EU “is not giving up on our closest, deepest, and most important partnership, with the United States… And we will need each other even more in tomorrow’s increasingly conflictual and competitive world.”

His tone matches that of European Commission President Ursula Von der Leyen earlier this month, who declared that “we know that the global trading system has serious deficiencies. I agree with President Trump that others are taking unfair advantage of the current rules. And I am ready to support any efforts to make the global trading system fit for the realities of the global economy. But I also want to be clear: Reaching for tariffs as your first and last tool will not fix it.“

WTO Director-General Ngozi Okonjo-Iweala, speaking at the Council on Foreign Relations, highlighted how there are promising overlaps in looking at the administration’s unilateral objectives and the objectives of multilateral organizations. “In every crisis, there is an opportunity between multilateral objectives and unilateral objectives,” she said. “I do agree with the administration now… when they say there needs to be dynamism in the system, I share that. Some of the criticisms they make, I agree with because I have said the same. We need to get more results. We need to re-dynamize the system. We don’t need to have things cast in cement that may not be relevant to twenty-first-century issues anymore.” 

She also agreed with the White House’s complaint, as stated in an April 2 executive order, that the economic framework supported by the Bretton Woods system “did not result in reciprocity or generally increase domestic consumption in foreign economies relative to domestic consumption in the United States.” In addition, Okonjo-Iweala urged resource-rich African nations to focus more on building value-added enrichment and employment within the region to increase domestic demand, even as she urged China also to increase domestic demand.

US Treasury Secretary Scott Bessent, speaking at the Institute of International Finance, said, “China can start by moving its economy away from export overcapacity and toward supporting its own consumers and domestic demand.” In addition, he said that “the IMF and the World Bank serve critical roles in the international system. And the Trump administration is eager to work with them—so long as they can stay true to their missions.”

Bessent also said that the IMF will need “to call out countries like China that have pursued globally distortive policies and opaque currency practices for many decades” and “call out unsustainable lending practices by certain creditor countries,” adding that “a more sustainable international economic system will be one that better serves the interests of the United States and all other participants in the system.”

In his IMFC-DC Statement, released yesterday, Bessent said, “we need to restore the foundations of the IMF and World Bank. The United States continues to appreciate the value the Bretton Woods Institutions can provide, but they must step back from the expansive policy agendas that stifle their ability to deliver on their core missions.” He added that “for low-income countries in particular, both the IMF and World Bank should promote policy discipline for countries to strengthen their institutions, tackle corruption, and ultimately lay the foundation for sound investment so that they see a future that no longer relies on donor assistance.“

These leaders this week are sending a clear signal that they are not walking away from decades of established relationships and structures that have served the world well. Of course on the other hand, there is no guarantee that China and other countries will agree with the policy trajectory previewed on various stages in Foggy Bottom. Policy volatility will remain a reality for the next few years. But the initial messaging from the first days of the 2025 IMF-World Bank Spring Meetings gives reason for optimism.

APRIL 24 | 8:00 AM ET

In defense of “boring”: A European leader’s message to Trump

Warren Harding, a genial but bland Republican senator from Ohio, won the US presidential election of 1920 behind the campaign slogan “Return to normalcy.” It was a salve for an American electorate, giving him more than 60 percent of the vote, following US President Theodore Roosevelt’s adventurism, American engagement in World War I, then the failed postwar idealism of US President Woodrow Wilson.

“America’s present need is not heroics but healing,” Harding said, “not nostrums but normalcy; not revolution but restoration; not agitation but adjustment; not surgery but serenity; not the dramatic, but the dispassionate…” 

It was certainly unintentional, but I heard echoes of Harding when Valdis Dombrovskis, a Latvian who serves as an executive vice president for the European Commission, came to the Atlantic Council yesterday in defense of “boring” predictability.  While mentioning US President Donald Trump only once in his opening remarks, he underscored what Europe has long seen as its shared virtues with its American partners.  

“You see our fundamental values, individual liberties, democracy, and the rule of law often painted as weakness by authoritarian regimes to prey upon,” said Dombrovskis, who previously served as the European Union’s (EU’s) trade negotiator and is one of Europe’s longest-serving commissioners. “However, in times of turmoil, predictability, the rule of law, and willingness to uphold the rules-based international order become Europe’s greatest assets. We are committed to doing whatever it takes to defend our “boring” democracies, because boring brings certainty and a safe haven when a rules-based order is questioned elsewhere. Our processes allow for debates and consultations to take place, building buy-in from our key stakeholders and enabling us all to pull in the same direction.”

This week’s meetings of the International Monetary Fund (IMF) and World Bank in Washington, DC, are arguably the most important since the financial crisis of 2008-2009, because the Trump administration is seeking fundamental changes to the world trading and financial system not seen since the Bretton Woods agreement of 1944. In that year, the United States and its partners brought down protectionist trade barriers, established a new international monetary system, and laid a foundation for post-World War II global economic cooperation. One of the results was the creation of the IMF and the World Bank.

The last thing the Trump administration appears to want is a return to the normalcy of the eighty years that followed that agreement, arguing that the United States has been taken advantage of by its trading partners and that international system. One can say many things about Trump’s first hundred days in power, but “boring” certainly isn’t one of them. 

Read more

Inflection Points Today

Apr 24, 2025

In defense of ‘boring’: A European leader’s message to Trump

By Frederick Kempe

EU Commissioner for Economy and Productivity Valdis Dombrovskis spoke at the Atlantic Council in Washington on April 23, making the case for greater predictability.

European Union International Financial Institutions

Dispatch from IMF-World Bank Week: Don’t forget the real theme of the week

These meetings mark a milestone for Syria. But more political engagement will be necessary.

How can the IMF return to its core mandate in a vastly different global economy?

Banque de France Governor François Villeroy de Galhau says further rate cuts likely this year

Treasury Secretary Scott Bessent signals conditional support for the IMF and World Bank

Scott Bessent’s calls for reform are reasonable. The IMF should deliver on them.

What ever happened to climate change?

Bloomberg’s Saleha Mohsin: “Everyone wants to talk about the dollar’s reign ending, but no one wants to claim the crown”

EU Commissioner Valdis Dombrovskis on why the EU is “not giving up” on the United States

Catch up with everything happening at the Atlantic Council on day three

Read our day two analysis

APRIL 23 | 6:04 PM ET

Dispatch from IMF-World Bank Week: Don’t forget the real theme of the week

With tariffs and trade continuing to dominate conversations taking place in the halls of these Spring Meetings, it would be easy to forget that there is an official theme, and it isn’t trade: It’s jobs.

That is fitting, in my view. Here’s why:

There are two numbers that I’ve seen over and over again as I dash from building to building on 19th Street. One, of course, is the 2.8 percent global growth forecast, down from 3.3 percent as projected in January. But the other is 1.2 billion: That’s the number of young people set to enter the labor force in emerging markets and developing economies over the next decade. I often see it alongside the number 420 million, which is the estimated number of jobs to be created. Even if the models are way off, the math will not add up.

Beyond this jobs gap equation, jobs are being discussed (including at yesterday’s World Bank flagship event) as a factor, if not a multiplier, in the broader economic growth equation. Jobs are linked to trade and, in many ways, to other dynamics of the global economy. That includes the challenges that many emerging markets and developing economies face, such as debt, demographic pressures, domestic-resource and private-capital mobilization, and facilitating the digital transformation.

You could say we have heard this all before. We have. But in this era of geopolitical fragmentation and geoeconomic tension (some might say “turmoil”), it’s helpful to drive attention and meaningful action toward an agenda that leaders and investors from all regions and income groups can and should rally behind. And job creation is apt for that.

That’s even the case for the United States. US Treasury Secretary Scott Bessent acknowledged as much in his speech this morning, noting that job creation and promoting prosperity are key US interests.

Watch more

APRIL 23 | 4:48 PM ET

These meetings mark a milestone for Syria. But more political engagement will be necessary.

The participation of a Syrian government delegation in the 2025 IMF-World Bank Spring Meetings in Washington, DC, marks a significant milestone in Syria’s efforts to reintegrate into the global economic community. Led by Finance Minister Mohammed Yosr Bernieh and Central Bank Governor Abdelkader Husrieh, this visit represents Syria’s first high-level engagement with these institutions in over two decades.

At the Spring Meetings, Syrian officials are participating in discussions focused on restoring financial support and aid to Syria. Notably, a roundtable hosted by the Saudi Finance Minister Mohammed Al-Jadaan and the World Bank garnered strong international interest in Syria’s reconstruction efforts. Additionally, the United Nations Development Programme (UNDP) has announced plans to deliver $1.3 billion in aid over the next three years to support Syria’s rebuilding initiatives.

One of the critical challenges facing Syria is the existing US sanctions against the country, which have hindered reconstruction efforts. Recent developments indicate a small shift in this dynamic. The UNDP has received a sanctions waiver from the US Treasury Department to raise fifty million dollars for repairing the Deir Ali power plant south of Damascus. Furthermore, Saudi Arabia’s commitment to pay approximately fifteen million dollars in Syria’s arrears to the World Bank is a significant step toward enabling Syria to access funds through the International Development Association, which provides grants to low-income countries.​ Following Syria’s engagements in Washington, the IMF appointed Ron van Rooden as its first mission chief to Syria in fourteen years, signaling a potential revival of economic cooperation aimed at supporting Syria’s recovery.

Despite these steps, more political engagement is necessary to achieve substantive progress. Washington has signaled its hesitancy for more engagement by reportedly limiting Syrian Foreign Minister Asaad Al-Shaibani’s travel visa to New York only and restricting his ability to participate more broadly in meetings in Washington. However, a bipartisan letter issued on Monday by Senators Jeanne Shaheen (D-NH) and Jim Risch (R-ID) of the Senate Foreign Relations Committee reflects a growing bipartisan recognition among US policymakers of the potential benefits of reengaging with Syria under carefully considered conditions. The letter advocates for a strategic approach to US-Syria relations, emphasizing the importance of facilitating dialogue and cooperation to support Syria’s reconstruction and regional stability.

But for momentum to build, both Washington and Damascus must explore more robust diplomatic channels, including incremental confidence-building measures and expanded humanitarian coordination. This could create a framework conducive to deeper economic collaboration, ultimately serving US national security interests while fostering stability in Syria and the region.​ 

APRIL 23 | 3:55 PM ET

How can the IMF return to its core mandate in a vastly different global economy?

At the Institute of International Finance conference today, US Treasury Secretary Scott Bessent said that the United States will exercise strong leadership in the IMF and World Bank to push those institutions to refocus on their core mandates after years of “mission creep.” For the IMF, this means promoting members’ policies that are conducive to sustained and balanced trade. And when trade imbalances occur, the adjustment should be symmetrical for surplus and deficit countries, not aimed only at deficit ones. The IMF’s other critical mission is to provide short-term, temporary assistance to member states in balance-of-payment crises—provided the member in question changes the policies that led to the crisis.

While the push for the Bretton Woods institutions to focus on their core mandates is necessary and timely, many questions remain on how the IMF, in particular, will do that under international conditions drastically different from the ones eighty years ago.

The Bretton Woods Conference in 1944 produced a fixed but adjustable exchange rate system with largely closed capital accounts. Now, many countries want free trade, free capital flows, free exchange rate markets, and monetary sovereignty—even though not all of these can sustainably coexist without tension. So the question is, how can the IMF, with its current toolkit, rectify today’s persistent trade imbalances and prevent them from happening again? It would be a missed opportunity if delegates to this week’s meetings fail to come up with some ideas for how the IMF can accomplish this.

It is also important to clarify the line between the core mandate of short-term temporary assistance and longer-term, structural lending. How should the IMF approach the mandate of giving short-term financing to help members in balance-of-payment crises, given the reality that it can take a long time for countries to make the structural reforms necessary to avoid falling into further crises? At the same time, lending to support structural reforms is a longer and more intrusive process than short-term financing, opening up the IMF to criticisms of mission creep and interfering with borrowing nations’ sovereignty. As the IMF-World Bank Spring Meetings delegates discuss how to best return the IMF to its core mandate, such important issues need to be clarified as soon as possible.

APRIL 23 | 3:39 PM ET

Banque de France Governor François Villeroy de Galhau says further rate cuts likely this year

Read his remarks

Transcript

Apr 24, 2025

France’s François Villeroy de Galhau on a US recession: ‘Bad news for the US is bad news for all, including for Europe’

By Atlantic Council

The governor of the Banque de France, speaking at the Atlantic Council, said that the European Central Bank would likely cut interest rates further this year.

Europe & Eurasia European Union

APRIL 23 | 2:43 PM ET

Treasury Secretary Scott Bessent signals conditional support for the IMF and World Bank

One might be tempted to think—after Treasury Secretary Bessent’s remarks at the Institute of International Finance today—“another US administration, another call for Bretton Woods reforms.” On the surface, the speech does not seem fundamentally different from ones heard during previous administrations, with remarks that reminisce about the original Bretton Woods Conference, convey support for the mission of the institutions, and call upon the institutions to focus on their core mandate.

But it would be wrong to understand these remarks as a signal that the role of the IMF and World Bank will remain unchanged over the coming years. Instead, the secretary’s speech opens up fundamental challenges for the IMF and World Bank, both to their identity and their futures as global multilateral organizations.

First, it is not clear that the continued support of the Bretton Woods institutions expressed today will be the final word of the US administration. The White House is conducting a review of US membership in international organizations, and there are voices in the administration that would prefer the United States withdraw from the IMF and World Bank. While Bessent’s speech is an important opening statement, he will need to be able to point to concrete deliverables in order to win the internal debate against the isolationist wing in the US government.

Second, a return of each institution to its “core mandate” would involve a significant change in activities, running counter to the objectives of a large part of the IMF and World Bank’s membership. Eliminating workstreams on climate policies and social issues would imply a 180-degree turn for the current management of the institutions and the climate-conscious governments that have supported them in recent years; it would also mark such a turn for the constituency of developing countries that benefited from subsidized lending with relatively easy conditionality in recent years.

Third, for the IMF, the Treasury secretary’s missive to “call out countries like China that have pursued globally distortive policies and opaque currency practices” is reminiscent of an episode in the late 2000s, when the IMF was called upon to speak out more forcefully against Beijing’s exchange-rate practices. The result then was a refusal by China to meet its Article IV obligations, a standoff that was only resolved after the IMF softened its stance a few years later.

This is not to say that the United States does not have a valid point. The IMF has been reluctant to call out China for its distorting trade practices and could have been more attentive in looking into accusations that China has also been unduly managing its exchange rate. Given the lack of an explicit mandate on trade policy issues, and the need to work with government-provided data, the IMF will have to think carefully how it can accommodate the demands of the US government, and it will likely run into bitter resistance from Chinese authorities along the way. The ensuing confrontation could well lead to a breakdown of the IMF’s consensus-based way of operating and perhaps a deeper split in the membership of the institution.

Fourth, Bessent also called on the IMF to be tougher in enforcing conditionality for its loans and for the World Bank to cease lending to countries that no longer meet its eligibility criteria. Again, the United States has a valid point here, but it will result in a conflict with European countries that will worry about economic development in African partner countries (due in part to migration pressures across the Mediterranean). And China would, of course, benefit if development lending from multilateral institutions shrinks at a time when official development assistance is already on the decline.

In sum, the secretary’s speech, while providing much welcome support for the IMF and World Bank, has raised a host of issues that will require tough decisions within a relatively short timeframe. Expect intense meetings of financial diplomats to continue long after the flags in front of the IMF building have been put back into storage, awaiting the next formal gathering of the IMF and World Bank in October.

APRIL 23 | 2:11 PM ET

Scott Bessent’s calls for reform are reasonable. The IMF should deliver on them.

Today’s remarks by Treasury Secretary Scott Bessent at the Institute of International Finance were probably more closely watched than many of the IMF-World Bank official events. The remarks represented the first real statement of the Trump administration’s priorities for the Bretton Woods institutions. 

Bessent made clear that the Trump administration remains committed to maintaining its economic leadership in the world and in the international financial institutions. You could almost hear the huge sigh of relief coming from the institutions on 19th Street following this comment. Bessent also steered clear of grandiose proposals to reform the core mandates of the World Bank and IMF. Instead, his remarks made clear that both institutions have “enduring value,” and the focus should instead be on limiting “mission creep.” Another good sign that the Trump administration wants to work with, rather than step back from, the Bretton Woods institutions.

Some of Bessent’s key messages echo points delivered in the IMF managing director’s curtain-raiser last week, another welcome sign of potential alignment between the IMF and its largest shareholder. In short, the current global economic model is not sustainable, and large and persistent external imbalances need to be addressed. Bessent’s call on China to stop relying on overcapacity and exports to grow its economy could have been lifted straight from a speech by former Treasury Secretary Janet Yellen. But Bessent did something more novel by emphasizing that the United States also needs to rebalance and by calling on the IMF to critique both the United States and surplus economies. I could not agree more that the IMF’s External Sector Report needs to be more direct on what countries can do to address unsustainable imbalances. 

Other reforms called for in the speech urge the IMF to execute its mandate of temporary lending, call out unsustainable lending practices, and hold countries to account for not delivering on reforms. Again, these are not new messages from the United States. My question is whether IMF management, alongside its executive board, will feel more urgency to fulfill these types of reforms. I certainly hope so.

APRIL 23 | 1:37 PM ET

What ever happened to climate change?

At the 2024 Annual Meetings, climate change appeared to be front and center on the IMF agenda. Before the gatherings, the Fund released papers with provocative titles such as “Destination net zero: The urgent need for a global carbon tax on aviation and shipping” and “Sleepwalking to the cliff edge?: A wake-up call for global climate action.” The World Economic Outlook (WEO) elevated “combating climate change” to equal status with the task of promoting medium-term global growth.

But at these spring meetings, climate change is not to be seen—no recent papers and only six brief mentions in the first chapter of the WEO, including a single paragraph at the very end of the section on medium-term growth.

The IMF certainly has no hard and fast rules on what should be addressed in the WEO. With global economic and financial uncertainty demanding the attention of world leaders, other pressing issues also get short shrift this spring. For example, “poverty” gets few mentions. But downgrading attention on climate change appears to reflect a conscious decision at a moment when the United States, the Fund’s largest shareholder, is rejecting policies intended to address climate-related issues.

Speaking at the Institute of International Finance today, US Treasury Secretary Scott Bessent made clear the Trump administration’s view of climate issues on the agenda of the IMF. “Now I know ‘sustainability’ is a popular term around here. But I’m not talking about climate change or carbon footprints,” he said. “I’m talking about economic and financial sustainability… International financial institutions must be singularly focused on upholding this kind of sustainability if they are to succeed in their missions.”

The obvious question then is whether the IMF will respond by shifting away from climate-change mitigation in its core work of advising governments and lending.

APRIL 23 | 1:21 PM ET

Bloomberg’s Saleha Mohsin: “Everyone wants to talk about the dollar’s reign ending, but no one wants to claim the crown”

APRIL 23 | 11:10 AM ET

EU Commissioner Valdis Dombrovskis on why the EU is “not giving up” on the United States

Read the full transcript

Transcript

Apr 23, 2025

EU Commissioner Valdis Dombrovskis: With the rules-based order in question, Europe’s ‘boring democracies’ offer ‘certainty and a safe haven’

By Atlantic Council

At an Atlantic Council event on the sidelines of the IMF-World Bank Spring Meetings, the commissioner talked about the EU-US relationship, saying the bloc won’t give up on its transatlantic partner.

European Union Ukraine

APRIL 23 | 9:10 AM ET

Catch up with everything happening at the Atlantic Council on day three

Turkish Minister of Treasury and Finance Mehmet Şimşek: “Global trade fragmentation cannot be good for anyone”

Economy and Finance Minister Felipe Chapman on Panama’s relationship with the United States

Mapping Washington’s and Beijing’s next moves in the trade war

The Global Financial Stability Report highlights strains in the US Treasury bond market

Dispatch from IMF-World Bank Week: Behind the World Economic Outlook’s new call for “rebalancing”

The flagship reports walk a fine line

Ukraine’s Serhiy Marchenko: Why not discuss the seizure of Russian assets?

We’ve seen these risks before

Pakistan’s Muhammad Aurangzeb: Working with the US on commerce and trade is an “opportunity” for constructive engagement

What to know as China’s and the IMF’s forecasts continue to diverge

The IMF released its World Economic Outlook. Let the debate begin.

No recession, says IMF. That’s good news—but perhaps not as good as it sounds.

Catch up with everything happening at the Atlantic Council on day two

Read our day one analysis

APRIL 22 | 9:06 PM ET

Turkish Minister of Treasury and Finance Mehmet Şimşek: “Global trade fragmentation cannot be good for anyone”

APRIL 22 | 6:03 PM ET

Economy and Finance Minister Felipe Chapman on Panama’s relationship with the United States

APRIL 22 | 5:17 PM ET

Mapping Washington’s and Beijing’s next moves in the trade war

APRIL 22 | 5:01 PM ET

The Global Financial Stability Report highlights strains in the US Treasury bond market

The IMF’s Global Financial Stability Report (GFSR), released today, comprehensively describes the market turmoil triggered by the tariff war. So far, financial market conditions have been orderly, but risks of further asset price losses remain elevated.

Yields on US Treasury bonds have risen, lowering bond prices, contrary to their usual behavior when investors have flocked to them as safe haven assets like in previous bouts of market turmoil. The GFSR highlights the growing strains in the intermediation capacity of broker-dealers—which bid for Treasury securities at issuance to distribute to investors—in the Treasury market. In particular, the holding of Treasury securities has overburdened the balance sheets of broker-dealers—rising from just above 100 percent in 2008 to more than 400 percent in 2024. Repo rates’ heightened sensitivity to the volume of issuance also suggests that broker-dealers’ intermediation capacity may approach its limit. This has contributed to the growing illiquidity observed in the Treasury bond market, which will eventually make it less efficient and raise US financing costs.

Moreover, hedge funds have significantly piled into highly leveraged basis trades—taking long positions in Treasury futures contracts while shorting the cash market. Rising bond yields (or falling bond prices) have caused losses, forcing many hedge funds to liquidate their positions, amplifying bond price declines.

Many US banks have attributed the strains on broker-dealers’ balance sheets to regulatory constraints—especially the Supplementary Leverage Ratio (SLR)—and have argued for a relaxation or even removal of the SLR. At present, it looks like banks are making headway in their deregulation push under the Trump administration against a full implementation of Basel III, a proposed international banking regulatory framework. Similar demands have been made by bankers and some officials in the European Union as well.

However, banks’ deregulation efforts, which are enjoying political tailwinds in the United States, are at odds with the GFSR’s recommendations that member countries fully implement international prudential standards, including Basel III and the SLR. It will be interesting to see how the IMF reconciles these differences.

APRIL 22 | 3:19 PM ET

Dispatch from IMF-World Bank Week: Behind the World Economic Outlook’s new call for “rebalancing”

The IMF released its latest World Economic Outlook (WEO) today, downgrading its estimates for global economic growth this year and next, following the beginning of the tariff war and the considerable policy uncertainty surrounding it. Global growth projections for 2025 dropped 0.5 percentage points; US growth estimates are down 0.9 percentage points, while China’s have dropped 0.6 percentage points.

As Managing Director Kristalina Georgieva put it in her curtain-raiser speech last week: “Uncertainty is costly.”

Here at IMF HQ2, people are abuzz with worry about these downgrades. But those downgrades are old news, soft-launched at Georgieva’s speech last week.

Instead, here’s what I’m focused on: To deal with the tariff war and its negative impacts, the IMF—in the WEO—recommends that member countries “reform and rebalance,” sorting out imbalances between saving and investment at home (looking at you, United States) and imbalances between domestic consumption and production (what China needs to work on). It also calls on developing countries to more effectively mobilize domestic resources. Such reforms would balance out trade relationships and make them more sustainable, benefiting all.

Those recommendations are all well and good, but the IMF has not explained how it expects countries to be able to make these reforms. These countries have failed to make recommended reforms in the past when the international environment was much more benign, including during previous eras of low interest rates.

By highlighting the importance of balanced trade, the IMF has harkened back to its original mandate, formulated at the Bretton Woods Conference in 1944. And that is a good thing: Persistent trade imbalances (mainly with countries such as China and Germany posting surpluses while others, mainly the United States, incur deficits) have made the trading system unsustainable, both practically and—as the United States’ unilateral tariff moves show—politically.

Watch more

APRIL 22 | 3:07 PM ET

The flagship reports walk a fine line

The IMF faced some unique challenges in drafting this April’s World Economic Outlook (WEO) and Global Financial Stability Report (GFSR). The recent rapid trade and market developments make it next to impossible to produce a reliable baseline forecast for global growth. The IMF also had to walk a fine line in assessing the impacts of US actions without too overtly criticizing its largest shareholder—not an easy task on both counts. 

In this context, the IMF’s flagship reports do an admirable job of striking a balance between highlighting significant risks to the global economy from recent trade actions while also noting that markets have remained broadly resilient. The WEO’s “reference forecast” downgrades global growth 0.8 percent across 2025 and 2026, and growth forecasts for almost every country are also downgraded. But the WEO does not go so far as to forecast a global recession, and the IMF’s Pierre-Olivier Gourinchas stated in his remarks that financial markets have largely been resilient in the face of recent shocks. Likewise, the GFSR highlights recent volatility and elevated financial-stability risks without declaring a financial crisis to be imminent.

But the flagships do not shy away from laying out risks should trade tensions persist. Scrolling down in the WEO to page 33 (Box 1.1), the IMF lays out a more dire scenario from an extension of the US Tax Cuts and Jobs Act, continued weak domestic demand in China, and the lack of productivity growth in Europe. The GFSR highlights forward-looking vulnerabilities from a correction of asset prices and turbulence in sovereign bond markets.

The real message from both documents is heightened uncertainty. In fact, across the WEO and GFSR, the word “uncertainty” appears more than one hundred times. This message is on point, as uncertainty abounds and poses its own strains on the global economy.  But how countries, including advanced economies, deal with this uncertainty will be the real determinant for future global growth.

APRIL 22 | 2:34 PM ET

Ukraine’s Serhiy Marchenko: Why not discuss the seizure of Russian assets?

APRIL 22 | 2:02 PM ET

We’ve seen these risks before

The IMF’s flagship reports have achieved a remarkable feat—bringing a clear-eyed view to what recent tariff announcements and financial volatility in recent weeks imply for the global economy, without pretending to know much about what will happen in the near future.

The 0.5 percentage-point drop in projections for global growth was expected, following a slowing in the global economy in recent months and the April 2 US tariff announcements. Interestingly, the suspension of many US tariffs, increases in the US tariff rate on China, and Chinese tariff increases in response have not led to a forecast upgrade but rather changed the composition of growth away from the United States and China and toward other countries.

Focusing on specific numbers does not yield much insight, however, as both the World Economic Outlook (WEO) and Global Financial Stability Report are clear on the uncertainty that still prevails. Further asset price corrections in the United States (where share prices still look expensive), coupled with higher interest rates (due to impending fiscal stimulus) and exchange rate fluctuations, have the potential to create significant shocks that could destabilize financial markets. Emerging markets could be in for a rude shock, but the prospects for advanced economies with high debt are not much better, given leveraged balance sheets and strong interlinkages between financial institutions and other market participants that could quickly propagate shocks throughout the system.

Hence, there should be no illusion about the risks facing the world economy. Such risks are reminiscent of the 2008 financial crisis, and continued uncertainty about tariffs and other policies could move markets closer to the abyss. Uncertainty goes in both directions, however. The WEO rightly points out that a resolution of the tariff issue and an end to the Ukraine war, however improbable right now, could provide a major boost for the global outlook. Whether global projections become reality, therefore, depends largely on actions being taken by the White House over the coming months.

APRIL 22 | 1:55 PM ET

Pakistan’s Muhammad Aurangzeb: Working with the US on commerce and trade is an “opportunity” for constructive engagement

APRIL 22 | 1:52 PM ET

What to know as China’s and the IMF’s forecasts continue to diverge

The IMF forecast of 4 percent growth for China both this year and in 2026 probably won’t go over well in Beijing.

The IMF’s World Economic Outlook (WEO) number for China’s projected growth is down from its January forecast of 4.6 percent. That puts the IMF more at odds with China’s official forecast of “about 5 percent” growth, released last month. It also contrasts with last week’s announcement out of Beijing that the Chinese economy grew 5.4 percent during the first quarter as exporters tried to get ahead of US tariffs (a result that was released after the WEO’s drafting ended). The IMF now puts China’s growth last year at five percent, which accords with the government’s figure.

IMF Economic Counsellor Pierre-Olivier Gourinchas told reporters that US tariffs actually will take a 1.3 percentage-point bite out of China’s growth this year, but that fiscal expansion announced by Beijing last month will offset some of that loss in momentum. However, the WEO says that China is still struggling to shift away from export-driven growth: “The rebalancing of growth drivers from investment and net exports toward consumption has paused amid continuing deflationary pressures and high household saving.” Small wonder then that the IMF is now forecasting that “stronger deflationary forces” will result in zero inflation this year, down from the IMF’s earlier forecast of 0.8 percent inflation. The IMF’s China growth forecast is at the midpoint of projections from foreign investment banks. Goldman Sachs and Nomura forecast 4 percent, Citi and Morgan Stanley predict 4.2 percent, while UBS projects 3.4 percent. By contrast, the Rhodium Group is seeing the possibility of China’s growth being stronger than last year’s 2.4 to 2.8 percent growth (according to Rhodium Group’s own estimates).

APRIL 22 | 11:40 AM ET

The IMF released its World Economic Outlook. Let the debate begin.

The latest IMF World Economic Outlook (WEO), released today, has three separate projections for global growth, each based on different outcomes for the Trump administration’s tariffs. The projection the WEO’s authors emphasized in their press conference this morning (which they call a “reference forecast”) is based on the impact of the tariff increases announced between February 1 and April 4 and sees global growth of between 2.8 percent and 3 percent this year. Overall, that represents about a 0.5 percentage point cut in the IMF’s growth forecast from its last WEO update released in January.

There is a cottage industry of economists who dissect WEO forecasts, many of whom view their IMF brethren as being too inclined to accentuate the positive. The latest of these critiques came last weekend from Alex Isakov and Adriana Dupita at Bloomberg Economics. “In the four large crises we studied,” they wrote, “the fund’s initial assessment of the immediate impact on global growth understated it by 0.5 percentage points. However much the IMF may downgrade the growth forecasts to start, history suggests the ultimate blow will be worse.”

That said, the IMF’s take hardly falls into the realm of Pollyannaish forecasting. IMF Economic Counsellor Pierre-Olivier Gourinchas made it clear at the press conference this morning that the risks facing the global economy lean “firmly to the downside,” with the risk of a worldwide recession currently at 30 percent, up from 17 percent at the time of the WEO released in October 2024.

APRIL 22 | 10:03 AM ET

No recession, says IMF. That’s good news—but perhaps not as good as it sounds.

This morning, while launching the new World Economic Outlook, IMF Chief Economist Pierre-Olivier Gourinchas said that “while we are not projecting a global downturn, the risk it may happen this year [has] increased substantially.”

But what is a global downturn or, to use a more ominous term, a global recession?

In an advanced economy, such as the United States, a recession is usually defined as two successive quarters of negative gross domestic product (GDP) growth. Not all countries use that standard, but most include negative GDP growth as part of the definition of a recession. But it’s different when you are talking about the global economy. Because many developing and emerging markets can grow at 5 percent or more during a given year, a global recession can occur even when overall global GDP growth is positive. Think of it like this—if your car only goes 20 mph, going to 0 mph is a major problem.

But it’s also a problem if your car is going 40 mph and you suddenly can only drive at 20 mph.

The IMF has a broad range of criteria it uses to try to determine a global recession, including a “deterioration” in macroeconomic indicators such as trade, capital flows, and employment. Translation? They know it when they see it. When I was at the IMF, there was a debate about whether GDP growth under 2.5 percent would constitute a recession. It seems like today the IMF has made a determination about what this looks like in the current situation—2 percent GDP growth—although they call it a global economic downturn.

Pay close attention to how Georgieva answers this question in her press conference later this week. And just because the global economy isn’t in a recession (or global downturn) by the IMF’s standards at the moment, it doesn’t mean in a few months we won’t cross the threshold.

This post was updated at 1:20 p.m. to clarify the IMF’s position on a global economic downturn.

APRIL 22 | 8:58 AM ET

Catch up with everything happening at the Atlantic Council on day two

How countries are reacting to the trade war

Dispatch from IMF-World Bank Week: The “stealth meetings” kick off

Our experts outline the debates and topics on the minds of global finance leaders this week

Read earlier analysis

APRIL 21 | 8:52 PM ET

How countries are reacting to the trade war

As central bank governors and finance ministers gather in Washington, DC, for the IMF-World Bank Spring Meetings, they will be engaging in some of the most important trade negotiations since the creation of the Bretton Woods institutions in 1944.

History offers some perspective: In July 1930, after US President Herbert Hoover signed the Smoot-Hawley Tariff Act, a range of countries immediately retaliated against the United States, including France, Mexico, Spain, Japan, Italy, and Canada. Others, such as the United Kingdom, chose negotiation instead. 

Today, the GeoEconomics Center has a Trade War Index, tracking countries’ policy actions and rhetoric in response to the Trump administration’s tariffs as central bank governors and finance ministers prepare to meet their US counterparts.

In this index, countries receive scores from -1 to +1 based on their responses. Take Vietnam, for example: It scored a +1 on policy after the country’s officials sent Trump a letter offering to eliminate tariffs on US imports (though this offer has already been rejected by the United States) and followed up by dispatching a special envoy to Washington to keep talks moving.

On the rhetorical front, Vietnamese trade officials called the tariffs “unfair” but focused their comments on domestic impacts rather than directly criticizing the United States—earning the country a -0.5 on the communication scale.

Separating policy from rhetoric reveals how these governors and finance ministers are approaching the negotiation table. Are they feeling domestic pressure to respond? Do they believe they have leverage over the United States? How much economic pain can they withstand?

Countries such as India and Mexico know there is an enormous amount at stake. Their leaders have thus far proven willing to make both conciliatory statements and concessions to Trump in the hopes of securing a deal. Global markets are watching nervously. The outcome of the sideline negotiations at these Spring Meetings will signal whether the White House is truly in deal-making mode or whether, as we have argued at the GeoEconomics Center, many of these tariffs are in fact here to stay.

APRIL 21 | 4:57 PM ET

Dispatch from IMF-World Bank Week: The “stealth meetings” kick off

The IMF-World Bank Spring Meetings have long been marked by pageantry. The Washington headquarters are normally draped with banners. Cultural events have competed with panel discussions on headline economic issues featuring government ministers, captains of finance, and Nobel laureates. Over the years, the event has earned the moniker “Davos on the Potomac” among jaded staffers.

But this year’s gathering is very different. Call it the “stealth meetings.” The signage is gone from outside the building, and inside is a bare-bones schedule of panels. 

The tone is somber—and small wonder why. Just blocks away from the meetings sits the White House, where US President Donald Trump has spent his first one hundred days in office disrupting the global economy with tariffs unseen for a century. The United States is pulling back from international organizations, and its support for issues such as climate-change mitigation and poverty reduction is in question. Its position on the role of the IMF and World Bank in a rapidly changing international economy is unknown.

With the outlook for global growth clouded by the tariffs, all eyes turn to tomorrow’s release of the IMF’s World Economic Outlook (WEO). In last week’s curtain-raiser speech for the meetings, IMF Managing Director Kristalina Georgieva said that the WEO’s growth projections “will include notable markdowns, but not recession,” along with increases in the inflation forecast for “some countries.” Global recessions are relatively rare; the last occurred in the aftermath of the 2008 Global Financial Crisis. But there is plenty of room in a forecast of slower growth for individual countries to fall into recession—including some of the world’s largest economies. 

To break down the WEO and all the other news from the week, keep checking out our analysis throughout the week.

APRIL 21 | 4:31 PM ET

Our experts outline the debates and topics on the minds of global finance leaders this week

Spring Meetings unlike others—and not just because of trade

Why these meetings are existential for the IMF and World Bank

Dispatch from IMF-World Bank Week: A fractured foundation

Three ways to think about Trump’s tariffs

What to make of Argentina’s new $20 billion financial rescue

The true impact of Trump’s tariff war, beyond the stock market

No one is coming to save the global economy

Trump can make the IMF more effective

APRIL 20 | 5:15 PM ET

Spring Meetings unlike others—and not just because of trade

In Washington, DC, the flowers are blooming, the skies are blue, and the streets are filled with finance ministers and central bank governors from around the world.

The scene at the start of this year’s IMF-World Bank Spring Meetings is familiar, but the context could not be more different. Questions about tariffs, trade wars, and the Trump administration’s broader stance on multilateralism abound. IMF Managing Director Kristalina Georgieva kicked off the Spring Meetings with her curtain raiser last week, and she did not shy away from making clear that trade tensions and the on-again, off-again tariff increases generate significant risks for growth and productivity. She rightly pointed out that smaller countries will be caught in the crosshairs and need to put their own houses in order to withstand trade shocks.

But what was more notable was Georgieva’s focus on macroeconomic imbalances, shorthand for the disparity seen between, for example, the massive current account deficits of the United States and the surpluses of China, the European Union, and Japan. These imbalances have gotten scant attention from the IMF in recent years, despite being a persistent issue for decades. The IMF’s latest External Sector Report declared that imbalances were receding.

Yet macroeconomic imbalances represent a key element of US complaints about the unfairness of the international trading system. Surplus countries have relied on US import demand to fuel growth for years, and the United States has played its part by sustaining large fiscal deficits. Last week’s speech rightly brought this issue back to the forefront.

For a sense of how far the IMF will take this message, pay close attention to the World Economic Outlook, Global Policy Agenda, and International Monetary Fund Committee (IMFC) communiqué, which will all be released later this week.

APRIL 20 | 4:52 PM ET

Why these meetings are existential for the IMF and World Bank

While the trade war is top of mind for delegates at the IMF-WB 2025 Spring Meetings, there is also concern about US policy towards the two Bretton Woods institutions.

It isn’t yet clear what that policy will be—it will depend on the conclusions of the review of US participation in multilateral organizations, the findings of which are due in August. From my discussions with individuals who will be participating in the IMF-World Bank meetings this week, I could sense worry about a number of possible US policy stances, ranging from insistence that the two institutions strictly focus on their core mandates (reversing a perceived mission creep going on for some time) to US withdrawal from one or both institutions.

Since the United States is the largest economy in the world and the biggest shareholder of the IMF and World Bank, these institutions can only function effectively with the constructive engagement and leadership of the United States. Thus, this year’s spring meetings are of existential importance to the IMF and World Bank. While going through the public agenda, delegates should spend time to discuss and find ways to address the concerns raised by the US administration with minimal negative spillovers for the rest of the world: including the US concern about persistent trade imbalances, which it attributes to unfair trade practices, including high tariffs and other non-tariff measures, implemented by other countries. Progress in these discussions will be important to retain active US involvement in the two institutions.

For example, as a part of such progress, the IMF could put greater emphasis on its recommendations to countries running persistent current-account surpluses to make adjustments, including by strengthening their currencies, to promote more balanced trade relations over time, instead of putting the burden of adjustment solely on deficit countries.

The open, rules-based trading system—which has promoted aggregate world economic growth but failed to equitably distribute the fruits of free trade—is unraveling. Usual calls for member countries to lower tariffs and walk back other protectionist measures won’t be sufficient to stop it.

APRIL 20 | 3:16 PM ET

Dispatch from IMF-World Bank Week: A fractured foundation

If you’re at Dulles Airport this evening, look around. You might see one of the world’s finance ministers and central bank governors, representing over 190 countries, who are arriving for the most important IMF-World Bank Meetings since the 2008 Global Financial Crisis.

They land in a very different Washington than the one they left in October. US President Donald Trump has launched a global trade war, and, as a consequence, the IMF is set to forecast a major downgrade for the entire global economy. Whether the countries these financial leaders represent end up in a recession—or worse—depends in part on what happens over the next five days.

Usually, delegates’ time at these meetings is focused on a wide range of topics, from sovereign debt to new lending arrangements to financial technology. But this spring, there’s no debate over attendees’ focus: Trade will dominate, as each country looks to meet with the Trump administration to see whether any trade negotiation is viable. The main event will be when senior US and Chinese officials meet, if they do. It would be their first meeting since their countries levied tariffs higher than 100 percent on each other.

But here’s the irony of the week ahead: By engaging in all the bilateral negotiations, these countries are unintentionally undercutting the case for multilateral economic coordination that is the foundation of the Bretton Woods system.

Each country will work to secure the best arrangement for itself and its citizens. None of this would be surprising to the creators of the IMF and World Bank; just look at the minutes from the original conference to see all the wrangling between the forty-four founding nations.

But this is a first: The world’s largest economy, and the one that created the Bretton Woods system in the first place, is trying to completely uproot it.

For every country, the challenge of this week is to not get trapped in the past. There will be time to consider all the successes and failures of the past eighty years. But right now, the international economic order is being reshaped in real time.

That’s what this week is about: not who has complaints about the system—nearly every country has its fair share—but who has the vision for what comes next.

Watch more

APRIL 18 | 2:16 PM ET

Three ways to think about Trump’s tariffs

The second Trump administration has embarked on a novel and aggressive tariff policy, citing a range of economic and national security concerns. Our GeoEconomics Center is monitoring the evolution of these tariffs and providing expert context on the economic conditions driving their creation—along with their real-world impact.

The Trump administration utilizes tariffs in three primary ways, depending on the objectives of any particular action.

1. Negotiation tool: The administration sees tariffs as a way to put pressure on trade partners during negotiations, as well as a potential bargaining chip. Used in this way, tariff rates can increase US leverage and result in new trade agreements, like the US-China Phase One trade deal signed during Trump’s first term.
2. Punitive tool: Trump administration officials have stated that they would like to avoid overuse of financial sanctions as a form of coercive economic statecraft, since they believe it can incentivize countries to reduce their reliance on the US dollar. As an alternative, the Trump administration is relying more on tariffs to “punish” or “sanction,” including for non-trade issues. The administration values the ability to easily escalate the tariff rate and, therefore, its punitive power.
3. Macroeconomic tool: The Trump administration also, more conventionally, wields tariffs in support of a wide range of macroeconomic goals:
   • Protecting domestic industries, such as steel, from unfair trading practices and encouraging domestic manufacturing.
   • Decreasing US trade deficits.
   • Increasing revenue from duties. Of course, the “Catch-22” is that if reshoring is successful, the United States will not be able to increase revenue from import duties.

Explore the full Trump Tariff Tracker

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

APRIL 16 | 3:52 PM ET

Four questions (and expert answers) about Argentina’s new $20 billion financial rescue

Buenos Aires is getting a boost. On April 11, the International Monetary Fund (IMF) approved a twenty-billion-dollar, four-year loan to Argentina, with the first twelve billion dollars arriving on April 15. The Inter-American Development Bank (IDB) and World Bank followed up by releasing another $22 billion in financing. In response, Argentina lifted large elements of its currency and capital controls, known as the “cepo,” which had long stifled investment and growth. Marking the twenty-third IMF loan to Argentina since the 1950s, the deal comes as libertarian President Javier Milei has dramatically cut Argentina’s spending in an effort to stabilize government finances. Atlantic Council experts answered four pressing questions about Argentina’s latest financial rescue and the road ahead.

Read their answers

New Atlanticist

Apr 16, 2025

Four questions (and expert answers) about Argentina’s new $20 billion financial rescue

By Martin Mühleisen, Jason Marczak

What exactly did the IMF agree to, and what is required of Argentina? Our experts dive into the deal and map what comes next.

Argentina Fiscal and Structural Reform

APRIL 11 | 7:22 AM ET

To understand the impact of Trump’s tariff war, watch the bond market and the Fed—not just the stock market

The imposition of US tariffs and retaliatory tariffs by some trading partners, combined with a ninety-day pause of most “reciprocal” tariffs by US President Donald Trump, have led to extreme financial market volatility in recent days. While the equity market gyrations have occurred in relatively orderly market conditions so far, some recent developments have signaled that selling pressure may have spread to other markets—particularly US Treasury securities and short-term US dollar funding. 

To understand the financial stability impacts of the current market turmoil, it is important to monitor the pressure on these markets, which are crucial for the smooth functioning of the global financial system. Left unaddressed, these strains could trigger a freezing up of financial markets, raising the risk of a serious financial crisis.

Continue reading

New Atlanticist

Apr 11, 2025

To understand the impact of Trump’s tariff war, watch the bond market and the Fed—not just the stock market

By Hung Tran

The state of the US Treasuries and US dollar funding markets, as well as actions of the Federal Reserve, are where to focus attention.

Economy & Business Politics & Diplomacy

APRIL 8 | 11:46 AM ET

No one is coming to save the global economy

US President Donald Trump has launched a global economic war without any allies. That’s why—unlike previous economic crises in this century—there is no one coming to save the global economy if the situation starts to unravel.

There is a model to deal with economic and financial crises over the past two decades, and it requires activating the Group of Twenty (G20) and relying on the US Federal Reserve to provide liquidity to a financial system under stress. Neither option will be available in the current challenge.

First, the G20. The G20 was created by the United States and Canada in the late 1990s to bring rising economic powers such as China into the decision-making process and prevent another wave of debt crises like the Mexican peso crisis of 1994 and the Asian financial crisis of 1997. In 2008, as Lehman Brothers collapsed and financial markets around the world began to panic, then President George W. Bush called for an emergency summit of G20 leaders—the first time the heads of state and government from the world’s largest economies had convened.

What followed was one of the great successes of international economic coordination in the twenty-first century—the so-called London Moment, when the G20 agreed to inject five trillion dollars to stabilize the global economy. With this joint coordination, the leaders sent a powerful signal to the rest of the world that they would not let a recession turn into a worldwide depression.

Nearly twelve years later, at the outbreak of the COVID-19 pandemic, the same group of leaders convened to work on debt relief, fiscal stimulus, and—critically—access to vaccines.

Now we face the third major economic shock of the twenty-first century. But this one is fully man-made by one specific policy decision. It could, of course, be undone by a reversal of the decision to send US tariff rates to their highest level in a hundred years. But as I have said since November, Donald Trump is serious about tariffs, they are not only a negotiating tool, and that means many of them are likely here to stay.

There will be no “London Moment” this time around. The United States can’t call for a coordinated response to a trade war it initiated—one that is predicated on the idea that the rest of the world is taking advantage of the United States. 

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New Atlanticist

Apr 8, 2025

No one is coming to save the global economy

By Josh Lipsky

Neither the Group of Twenty nor the Federal Reserve should be expected to use their playbook from previous economic crises to respond to economic shocks caused by US tariffs.

China Economy & Business

APRIL 8 | 10:15 AM ET

The IMF is a good deal for the US. Here’s how Trump can help make it even more effective.

US President Donald Trump’s stance on foreign aid has raised questions as to what approach he will take with regard to international financial institutions, and in particular the International Monetary Fund (IMF). But Trump also takes pride in recognizing a good deal when he sees one, and the IMF is indeed a good deal for the United States and the American people. The cost of US participation is low, but the role that the IMF plays in fighting financial crises is invaluable to supporting the US economy. 

After four years representing the United States at the IMF, I can attest that the United States plays an outsized role at the institution. As US executive director, I engaged regularly with counterparts in regions such as Africa, the Middle East, and Latin America to help shape and support IMF lending in a manner that helped advance US interests and reduced Chinese influence. In this era of heightened uncertainty, the IMF could benefit from refocusing on its core priorities and helping countries stand on their own feet. Fortunately, the United States is well positioned to push for such reforms from within the institution. Should the United States instead opt to step back from the IMF, it would not only squander one of its most valuable international economic tools but would also open the door for China to play a lead role in an institution that has long supported US interests. 

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New Atlanticist

Apr 7, 2025

The IMF is a good deal for the US. Here’s how Trump can help make it even more effective.

By Elizabeth Shortino

The institution provides the United States a significant source of economic leverage, helps prevent financial crises, and serves as a counterweight to China’s influence.

Economy & Business International Financial Institutions

The post Inside the IMF-World Bank Spring Meetings as leaders navigate the global trade war appeared first on Atlantic Council.

The post McDowell interviewed by DW News on the Plaza Accord appeared first on Atlantic Council.

1. What did the IMF agree to and what is being asked of Argentina?

Argentina approached the IMF for a new program because it wanted to unwind strict controls on capital outflows that have been an obstacle for foreign investment over many years. Removing these controls could have led to a sharp depreciation in the exchange rate, which is why the government needed to bolster its foreign exchange reserves with IMF funds, both to instill confidence and to intervene, if necessary, to maintain orderly market conditions.

The IMF was willing to provide Argentina with another loan of twenty billion dollars, coming on top of the outstanding forty billion dollars that Argentina will still need to repay. About eleven billion dollars of the new loan will be used to cover loan repayments to the IMF over the next four years. However, given the substantial frontloading of the IMF’s disbursements, the IMF’s peak exposure to Argentina will increase to some $58 billion in 2026. The program is conditioned on the path of the government’s primary deficit, a halt on central bank financing of the government, and a floor under social expenditure, among other conditions. As a precondition for program approval, the government committed to let the exchange rate float within a band of 1,000 to 1,400 pesos per US dollar and to abandon current and capital account exchange rate restrictions.

—Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former IMF official with decades of experience in economic crisis management and financial diplomacy.

What is striking is not only the scale of the program and disbursements, but that both parties have agreed to a plan that presents a roadmap with significant support from other multilaterals (the IDB and World Bank) as well as from the market. The accumulation of reserves and the continuation of Argentina’s fiscal consolidation, as well as the elimination of the cepo, are all objectives that the market and investors have been pushing for as the next step of the Milei administration’s impressive reform agenda, as we explained in December. Now, this new agreement appears to be a roadmap to assuage investor concerns and strengthen the country’s ability to deepen its reforms and respond to global uncertainty.

—Jason Marczak is vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

2. What does this mean for Argentina’s economy?

One of the key takeaways is that Argentina, and the Milei administration more specifically, now has the ability to think about the next chapter in its stabilization and reform agenda, with an emphasis on the latter. With the limitations that the agreement sets on the central bank’s ability to intervene in the foreign currency market (so long as there are no wild moves in the exchange rate) the bank should now be able to shore up its reserves by focusing on the acquisition, rather than the sale, of dollars. This will likely be done conservatively to prevent an upward pressure on the local dollar value, but it is good news in the medium term for Argentina’s reserves and for the sustainability of its debt.

Looking ahead into 2026, if the exchange rate holds within the agreed-to bands and the country acquires significant reserves, this will allow Argentina to reenter international capital markets and access private financing at lower rates (because of the lower risk that more reserves entail). This, in turn, would allow the country to meet its obligations with foreign creditors while seeing its country risk fall further, finally bringing down its sovereign risk premiums to levels closer to the regional average. This is a necessary condition to unleash the foreign investment that the country needs to fulfill its potential.

—Jason Marczak

The reforms of the Milei government have boosted confidence in its ability to lift Argentina’s economy on a durably higher growth path at lower inflation. To maintain public support after this past year’s painful but necessary budget-cutting exercise, it is essential that private investment now kicks in to support employment and growth over the coming years. The removal of capital controls is an important component of this plan, along with other structural reforms that are partly covered by the program.

However, the exchange rate is still overvalued, which by itself is reducing Argentina’s attractiveness as an investment destination, and a rapid exchange rate adjustment could lead to a resurgence in inflation. This could undermine economic as well as political sentiments, proving fatal for the overall reform effort. The IMF’s support could therefore be critical for the government to maintain its market-friendly policy course.

—Martin Mühleisen

3. Is this a vindication of Milei’s stabilization plan? What might this mean for Argentina’s politics?

The IMF has been in a difficult position. The loan will significantly increase its already large exposure to Argentina, which has a history of difficult and controversial programs with the IMF. In case of a global downturn, there is a risk that growth may again disappoint, leading to further peso depreciation and resurgent inflation. Given the political significance of the exchange rate, the government could then be tempted to use its reserves to artificially prop up the peso in the run-up to this year’s midterm elections, a strategy pursued with disastrous results by some previous governments.

On the other hand, the Milei government has successfully implemented a major fiscal adjustment effort, and it has a valid claim that its treatment by the IMF should at least be as favorable as that of the previous government, which was granted a de facto loan rollover without any serious reform commitments in exchange.

The stakes are therefore quite high. But if the IMF and the Milei government can implement a successful reform program that will meet with electoral and parliamentary approval, it could finally herald a departure from Argentina’s lost decades, both economically and politically.

—Martin Mühleisen

The compromise reached on monetary and reserves policy between the IMF and the government was greatly aided by the proven commitment of the administration with its own home-grown stabilization program. Few instances exist where a government has been as committed to fiscal consolidation as the Milei administration is. This commitment, which was essential to stabilize the economy and rein in triple-digit inflation, has been rewarded. The key now will be to see how the new phase of the stabilization program progresses. Particularly, if the administration succeeds in moving away from the foreign exchange rate anchor on inflation (via the now suspended currency controls) and toward a fiscal anchor that weakens inflation by controlling the scale of spending. If that mission succeeds, it will be great news for the economy and the administration.

—Jason Marczak

4. What are the wider implications, and what should we expect next?

If the program succeeds in its implementation and Argentina successfully navigates the current global uncertainty without stumbling back into currency or capital controls, the future may be much brighter, especially if the country can regain access to private finance and further investment flows. The visit by Treasury Secretary Scott Bessent to Buenos Aires and the clear support by US officials, including Bessent, Secretary of State Marco Rubio, and congressional leaders such as Representative Maria Elvira Salazar, is also promising and indicates US commitment in the days ahead.

It also remains to be seen what the political map will look like following Argentina’s October midterm elections. Will voters reward the government for its bold move toward liberalization or will an unexpected surge in inflation erode some of the administration’s support? Provincial elections between now and October will be a good thermometer for the market to gauge the political temperature ahead of the midterms, with potential effects on the market’s risk perception.

With the new deal and with the elimination of large elements of the cepo, Milei’s government has closed its opening, crisis-management chapter. It is now in a new moment of consolidation that may yet see the country move on to a period of stability and growth moving forward.

—Jason Marczak

The Argentina loan is a first test of the Trump administration’s dealings with the IMF. There has been a suggestion by the White House that Argentina should unwind its central bank swap line with the People’s Bank of China in exchange for US support at the IMF Executive Board. Argentina has since partially renewed this swap line, however, no doubt reflecting its dire need for foreign exchange reserves. Bessent’s visit to Buenos Aires on Monday provided a positive signal. But only the coming months will reveal the extent to which both Argentina and the IMF will be drawn into the US-China rivalry, and whether there is indeed some middle ground that a large emerging market economy and a multilateral lender can hold between these two geopolitical powerhouses.

—Martin Mühleisen

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There is a model to deal with economic and financial crises over the past two decades, and it requires activating the Group of Twenty (G20) and relying on the US Federal Reserve to provide liquidity to a financial system under stress. Neither option will be available in the current challenge.

First, the G20. The G20 was created by the United States and Canada in the late 1990s to bring rising economic powers such as China into the decision-making process and prevent another wave of debt crises like the Mexican peso crisis of 1994 and the Asian financial crisis of 1997. In 2008, as Lehman Brothers collapsed and financial markets around the world began to panic, then President George W. Bush called for an emergency summit of G20 leaders—the first time the heads of state and government from the world’s largest economies had convened.

What followed was one of the great successes of international economic coordination in the twenty-first century—the so-called London Moment, when the G20 agreed to inject five trillion dollars to stabilize the global economy. With this joint coordination, the leaders sent a powerful signal to the rest of the world that they would not let a recession turn into a worldwide depression.

Nearly twelve years later, at the outbreak of the COVID-19 pandemic, the same group of leaders convened to work on debt relief, fiscal stimulus, and—critically—access to vaccines.

Now we face the third major economic shock of the twenty-first century. But this one is fully man-made by one specific policy decision. It could, of course, be undone by a reversal of that decision, which if it kicks in at midnight tonight will send US tariff rates from 2.5 percent last year to over 20 percent this year—the highest in a hundred years. But as I have said since November, Donald Trump is serious about tariffs, they are not only a negotiating tool, and that means many of them are likely here to stay.

There will be no “London Moment” this time around. The United States can’t call for a coordinated response to a trade war it initiated—one that is predicated on the idea that the rest of the world is taking advantage of the United States. Some countries actually have an incentive to see the situation in financial markets worsen, in the hope that it puts pressure on the Trump administration to relent. Others may want to make bilateral deals, but a coordinated effort between China, Europe, Russia, and Brazil is off the table. This will make for an especially tense G20 finance ministers meeting in ten days, when Treasury Secretary Scott Bessent meets his colleagues for the first time at the International Monetary Fund-World Bank Spring Meetings in Washington, DC. Bessent can expect to face pointed questions from his counterparts on why the United States is reverting to the very protectionism that led to the creation of the Bretton Woods system eighty years ago.

The second—and more powerful—actor in the global economy has been the US Federal Reserve. In the global financial crisis and during the COVID-19 pandemic, the Federal Reserve slashed rates to zero, injected trillions into the US economy through quantitative easing, and issued swap lines around the world to help countries access dollars when they most needed it.

This time around, Chair Jerome Powell has signaled to the White House the so-called “Powell Put” is a long way off. On Friday, Trump posted on social media, “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates.” This makes sense if you believe tariffs will indeed cause higher prices and put economic stress on millions of US citizens. But Powell said the same day that “we don’t need to be in a hurry.” He wants to see how the crisis unfolds. In a different situation, if the markets had fallen by 20 percent because of, say, a virus or a terrorist attack on the United States, then the Fed would likely have reacted very differently.

Powell, however, understands that a trade war built on high US tariffs could prove to be stagflationary—the dreaded combination of higher prices with slower growth. A stagflationary environment isn’t necessarily the time for pre-emptive rate cuts since lower rates might further fuel inflation. Powell also wants to send the signal that this policy could be undone by the White House—or, of course, by Congress—and show his colleagues in Washington that they can’t rely on the Fed to fix a problem of their own making.

The situation is going to become incredibly complicated for the Fed in the weeks ahead. Economic conditions in the United States could deteriorate quickly. Other central banks, including the European Central Bank, the Bank of England, and the Bank of Canada, may start cutting rates. That’s because they are primarily worried about weaker economic growth, not inflation from higher import costs.

This will leave the US Federal Reserve with higher rates than the rest of the world—and Trump will likely grow increasingly frustrated with a Fed chair whom he has clashed with over and over again since he appointed Powell back in 2017. Trump is likely to feel that the Fed is undercutting him in his trade war while other central banks are supporting their political leadership. The truth will be more nuanced.

Don’t expect the pressure to get to Powell.

Powell has exactly one year left on his term, and he appears committed to leave a legacy as a Federal Reserve chair who fiercely protected the institution’s dual mandate and independence. So, while there may be an economic pain point where the Fed has to step in—it’s further away than both Trump and the markets are hoping.

In the past week analysts have been trying, understandably, to compare the market reaction to what happened during the global financial crisis and the COVID-19 pandemic. But the reality is that these are both poor barometers for the situation. In both previous economic crises this century, the toolkit of international coordination and central-bank firepower were deployed to stabilize the situation. This time, the same tools won’t fix what’s being broken. 

Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser at the International Monetary Fund. 

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After four years representing the United States at the IMF, I can attest that the United States plays an outsized role at the institution. As US executive director, I engaged regularly with counterparts in regions such as Africa, the Middle East, and Latin America to help shape and support IMF lending in a manner that helped advance US interests and reduced Chinese influence. In this era of heightened uncertainty, the IMF could benefit from refocusing on its core priorities and helping countries stand on their own feet. Fortunately, the United States is well positioned to push for such reforms from within the institution. Should the United States instead opt to step back from the IMF, it would not only squander one of its most valuable international economic tools but would also open the door for China to play a lead role in an institution that has long supported US interests. 

US participation in the IMF comes with significant leverage and burden-sharing

The IMF’s large resources (approximately one trillion dollars in loanable resources), broad membership, and ability to apply robust economic conditions enable it to prevent and mitigate economic crises. IMF lending catalyzes other donor finance from the World Bank, regional development banks, and official lenders to support fundamental economic reforms. US participation in the IMF yields roughly four to five times the leverage in terms of IMF lending—and even more leverage if incorporating lending from other donors. Put simply, for every dollar the United States lends, others lend at least four.

Economic crises can be costly to the United States, and Republican and Democratic administrations alike have turned to the IMF to be a first responder. The institution has for many years helped ensure economic stability in countries of strategic importance to the United States. In Ukraine, for example, the IMF is providing a $15.5 billion loan alongside US and European economic assistance—lending that is conditioned on Ukraine undertaking responsible fiscal policies and addressing corruption. IMF lending to Egypt, Pakistan, and Jordan has promoted sound fiscal and external policies, which in turn have supported both US security and economic interests. IMF lending to small African countries comes with specific conditions that require measures to strengthen anti-corruption and good governance, which in turn protects US investments in these countries. And IMF economic conditions are, by their nature, aimed at helping countries stand on their own feet and reduce their reliance on donor finance.

The IMF is an important counterbalance to China

The IMF also serves as an important counterweight to China by providing an alternative to opaque, unsustainable Chinese lending. In countries such as Ghana, Zambia, and Sri Lanka, the IMF played a pivotal role in securing Chinese cooperation to restructure unsustainable loans. Further, IMF surveillance of the Chinese economy also sheds light on the Chinese economic model, which relies on overcapacity in key sectors to employ its people and drive global prices lower—although the institution’s recent surveillance reports have not gone far enough to call China out on these unsustainable practices. Importantly, US influence in the IMF, particularly with regard to borrowing countries that have been recipients of the Belt and Road Initiative, serves as an important tool for US soft power.

The cost of US participation is low

US participation in the IMF costs next to nothing. The United States’ quota, the US financial contribution held at the IMF, acts as an exchange of assets: when the IMF draws on US quota assets (i.e. US dollars) to extend a loan to a borrowing country, it pays interest on these drawings using its Special Drawing Rights (SDR) interest rate. Thus, the cost of these loans to the United States is simply the interest rate differential between the interest the Treasury Department would have earned on the Treasury bonds and the interest it instead earned on the SDR.

Likewise, the United States is required to hold a small amount of its quota subscription in SDRs, and the cost of holding these funds in SDRs can be quantified by the valuation changes of the SDR relative to the dollar. As a result, the cost of US participation in the IMF is driven by the interest rate and exchange rate differentials between the US dollar and the SDR. In most years, this differential is quite narrow, since the US dollar makes up 43 percent of the SDR basket. Indeed, in fiscal year 2023, the Treasury Department reported a $407 million gain in unrealized returns from net valuation and interest in US participation. 

Over the past twenty years, annual costs have netted out to roughly zero, with the exception of 2022, when large valuation effects generated a negative effect. Importantly, these annual gains and losses do not cost US taxpayer dollars; they simply represent an estimate of unrealized gains and losses from the use of the United States’ existing quota subscription.

In 2023, the United States negotiated an agreement at the IMF to raise overall quotas by 50 percent and eliminate bilateral borrowing credit lines. The quota agreement, if implemented, would be a boon for the United States. It would solidify the US majority share of 17.4 percent, which provides the United States with a veto over all major decisions at the IMF that require an 85 percent majority.  It would also help reduce the likelihood that China could get a substantial increase in its quota share in the future. And it would reduce the influence over the IMF of countries that hold borrowing credit lines. Further, once authorized by Congress, the overall cost to the US taxpayer from an increase in US quota shares should be zero since this is a simple exchange of financial claims, or a swap of assets. 

An agenda for Trump 2.0 at the IMF

When the United States speaks, the IMF listens, and when the United States pushes, the needle does move. The current administration should leverage US leadership to ensure the IMF is supporting US economic interests. The good news is that this does not require a wholesale reform of the IMF. But it does require the institution to evolve, and the current administration should actively press for some reforms.  

Specifically, the United States should reinforce the message that the IMF needs to focus on what it does best: support macroeconomic stabilization and growth by focusing on sound fiscal, monetary, financial, and external sector policies. Now more than ever, these sound economic fundamentals are what will enable countries to weather heightened political and economic uncertainty and transitions in global trade. The IMF should make “back to basics” priority number one and leverage others’ expertise when it comes to issues outside of these core policies. The next US chair should use next year’s review of IMF surveillance policies to reexamine how best to serve its membership on nontraditional issues, such as climate, digital finance, and gender.

The United States should also press the IMF to call out the need for countries to raise domestic demand so as to narrow global external imbalances. In his speech to the Economic Club of New York on March 6, Treasury Secretary Scott Bessent said that “access to cheap goods is not the essence of the American Dream . . . for too long the designers of multilateral trade deals have lost sight of this.” The roots of this issue stem from policies by countries that hold current account surpluses, such as China, that promote a reliance upon external demand and an excess of savings. Deficit countries, such as the United States, also have a responsibility to run prudent fiscal policies. These concerns are not new; the Treasury Department has been raising the red flag on imbalances for many years, across Republican and Democratic administrations. Yet, the IMF continues to shy away from tough language for those countries that run massive current account surpluses and deficits. The IMF’s next annual External Sector Report, typically released in July, needs to be much bolder to include a clear message on policies that surplus and deficit countries can take to ensure global economic balances are sustainable—economically and socially.

The United States should also support efforts to enhance the effectiveness of IMF lending and help countries exit from IMF assistance. Under its Articles of Agreement, an IMF loan program must demonstrate how a borrower will resolve its balance of payments issue by the end of the program. However, the reality has been that many countries return to the IMF for multiple programs because reforms fall short of addressing the underlying economic issues—sometimes due to weak program design but often due to weak implementation and lack of political ownership.

Admittedly, some countries, particularly those that are low income, may require more than one program to tackle longstanding structural issues, but for many this is not the case. The IMF needs a strategy to help reduce repeat borrowing by designing economic conditions that will raise growth and address excessive debt burdens, and it needs to hold countries to implementation through its regular program reviews. 

Finally, the Trump administration can solidify US leadership at the IMF by requesting that Congress approve a 50 percent quota increase in the upcoming fiscal year 2026 budget request. This would send a clear signal of US support and enhance the United States’ ability to achieve reforms. At the same time, the White House should signal to Congress a willingness to continue pressing the IMF to modernize and improve its operations and enhance efficiency.

The IMF provides the United States a significant source of economic leverage, helps prevent financial crises, and serves as a counterweight to China’s influence—all for a negligible cost. The most economical and effective move the Trump administration can play is to use US influence in the IMF to push for reforms that ensure the institution more effectively pursues its core mission in ways that are compatible with US interests.

Elizabeth Shortino is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former US executive director at the International Monetary Fund. 

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The appeal is part of a lively ongoing discussion on both sides of the Atlantic over the fate of hundreds of billions of dollars in Russian sovereign assets that have been frozen since Russia’s full-scale invasion of Ukraine began in February 2022. Over the past three years, many have advocated using the funds to back Ukraine’s defense or cover the costs of the country’s reconstruction, but a range of political, financial, and legal considerations have so far prevented any firm moves toward seizure.

Canada and the United States have both introduced legislation empowering governments to confiscate frozen Russian assets, while the French parliament recently passed a non-binding resolution on the use of frozen Russian funds to back Ukraine. Others such as Polish Prime Minister Donald Tusk have voiced their support for the initiative. For now, however, Ukraine’s international partners can only agree on using the interest from the frozen funds to cover loans for Kyiv.

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Opponents say using Russia’s frozen assets to finance Ukraine’s defense and recovery could have far-reaching negative ramifications for the Western financial system that would outlast the current war. They warn that seizing Russia’s assets would undermine the international credibility of Western financial institutions, and may also lead to direct and indirect countermeasures from the Kremlin that could further fuel global instability.

Speaking at a gathering of EU leaders in Brussels in late March, Belgian Prime Minister Bart De Wever said any move to confiscate the Russian assets would be considered “an act of war.” The Belgian PM, whose country holds the largest share of the frozen Russian funds, warned that the proposed seizure would carry “systemic risks to the entire financial world system” and could spark retaliation, with any remaining Western assets located inside Russia likely to be targeted.

In addition to these considerations, the legal basis for the seizure of Russia’s frozen sovereign assets remains subject to considerable debate. Any court order commanding a government to seize Russian assets would be illegal under international law, Durham University professor of financial law Federico Luco Pasini told Euronews recently. However, if there was an executive decision by the government to seize the assets, “this could potentially bypass the issue,” Pasini stated. Others believe legal precedents exist, with some pointing to the use of frozen state assets to compensate victims of Iraq’s 1990 invasion of Kuwait.

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The idea of making Russia pay for the devastation it has caused in Ukraine has obvious appeal, with many seeing it as a form of international justice. Supporters believe the use of Russian funds would be particularly appropriate in this context, given the fact that few if any Kremlin officials are likely to be held legally accountable for war crimes committed in Ukraine. Using Russian money would also reduce the burden on taxpayers throughout the West and ease the political pressure on governments struggling to fund the largest European war since World War II.

Discussions over the possible transfer of frozen Russian assets to Ukraine have gained considerable momentum in recent months following the return of Donald Trump to the White House. The Trump administration’s decision to briefly pause military aid to Ukraine and the broader US foreign policy pivot away from Europe have highlighted the need to find alternatives to continued United States support for Ukraine.

The emergence of an axis of authoritarian regimes centered on Moscow is also now helping to convince many in the West that unprecedented measures are required. With North Korean soldiers fighting for Russia against Ukraine and Iran providing the Kremlin with large quantities of attack drones to bomb Ukrainian cities, there is a growing sense of insecurity in Western capitals. “Russia, China, Iran, and North Korea are hostile to democratic states’ interests and values. They are increasingly working together to undermine the international order,” noted former British Prime Minister Rishi Sunak in a recent article backing calls to hand Russia’s frozen assets to Ukraine.

Faced with the new geopolitical realities of an expansionist Russia and an isolationist United States, many policymakers across Europe may soon become more sympathetic to the idea of using Russia’s frozen sovereign assets to fund Ukraine’s ongoing fight for survival. However, there is still no consensus on the issue amid widespread reluctance to set what opponents believe would be a dangerous precedent. While supporters argue that the seizure of Russia’s assets could be legally justified, any decision will ultimately be a test of Western resolve and a matter of political will.

Mark Temnycky is a nonresident fellow at the Atlantic Council’s Eurasia Center and an accredited freelance journalist covering Eurasian affairs.

Further reading

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Any discussion on the future course of the war against Russia and the terms of any peace deal must take into account the fact that Ukraine is a now major military power in its own right, writes Serhii Kuzan.

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If Trump wants peace in Ukraine, he must increase the pressure on Putin

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Weeks after Ukraine backed a US proposal for an unconditional ceasefire, Russia continues to stall and push for further concessions. If Trump wants to secure peace, he must increase the pressure on Putin, writes Doug Klain.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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That review could put the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) in the crosshairs, raising doubts about the United States’ commitment to the stability and predictability these institutions were designed to uphold. The Trump administration reportedly paused contributions to the WTO this month, after targeting the organization in his first term. And though Trump engaged with the World Bank and IMF in his first term, he has not revealed his plans for these institutions in his second term. The Heritage Foundation’s Project 2025, from which Trump at times has distanced himself but which has formed a blueprint for much of the administration’s early agenda, calls for withdrawing from both.

Concerns are growing—particularly among policymakers and experts in “New South” countries in the Mediterranean and South Atlantic basins—about the direction in which the international financial system is heading. The coming months and years will reveal the consequences of these evolving dynamics for global economic governance.

Multilateral institutions under siege

The IMF, World Bank, and WTO have provided the backbone of post-World War II global financial stability. But if Trump’s review of multilateral organizations leads to the United States reducing its contributions or withdrawing its leadership entirely, that could render these institutions ineffective, leaving emerging markets vulnerable to soaring borrowing costs and financial instability.

The IMF’s effectiveness hinges on US backing. A disengaged Washington would severely weaken the institution’s ability to manage global financial shocks—or to see them coming in the first place. Without access to US fiscal data and financial support, the IMF’s early-warning system would be significantly impaired, leaving emerging economies particularly exposed to unforeseen economic crises. A diminished World Bank, meanwhile, could create space for alternative lenders, such as China’s Asian Infrastructure Investment Bank.

In the event of a US withdrawal from the Bretton Woods institutions, other major players such as China, India, and European countries may push for reforms, but any new framework would likely be marked by deep internal divisions and a departure from consensus-driven governance.

From rules-based to power-based trade

Even before the apparent pause in US funding, the WTO has suffered under US pressure, with its dispute-settlement mechanism effectively sidelined by Washington’s refusal to appoint appellate judges. The result? Global trade is increasingly governed by bilateral deals, where economic power, rather than rules, dictates outcomes.

At best, this shift accelerates the rise of plurilateral trade arrangements, where smaller groups of nations set the terms of trade outside the WTO framework. At worst, it heralds a chaotic trade environment where power politics replace consensus-driven rulemaking, fragmenting the global trading system into competing blocs.

If nations are forced to align with either a US-centric order or alternative economic blocs, that would heighten the risk of fragmentation and global instability.

A shattered order—or the dawn of a new system?

As the United States considers pulling back from the global financial system, countries in Latin America, Africa, and Asia are seeking greater financial independence and constructing alternative frameworks for trade, investment, and crisis management. These trends were evident before Trump’s return to the White House, and his approach is likely to only accelerate them. Among the key developments:

• De-dollarization initiatives: Nations from the BRICS grouping of emerging economies, including Brazil and India, are working to expand trade in local currencies, while China and Russia increasingly settle deals in yuan and rubles.
• New development banks: Institutions such as the African Export-Import Bank (Afreximbank) and the New Development Bank (commonly known as the BRICS bank) are emerging as real—albeit far from optimal—alternatives to the IMF and World Bank. They offer financing without the traditional Western-style conditionalities, reflecting a growing desire among some countries for options that align more closely with their own political and economic priorities.
• Alternative payment systems: Russia’s System for Transfer of Financial Messages (SPFS) and China’s Cross-Border Interbank Payments System (CIPS) platforms are attempting to serve as substitutes for the globally dominant, Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging service, though both SPFS and CIPS are still a long way from becoming true alternatives to SWIFT. Meanwhile Iran and India are exploring digital-payment linkages to bypass Western financial restrictions.
• Regional trade agreements: The African Continental Free Trade Area and Latin America’s growing Mercosur bloc are shifting economic dependencies away from Western-led structures.

These developments signal a significant and, in many ways, regrettable development: The world is moving beyond the dominance of Western financial institutions toward a more fragmented and less coordinated economic order. While this new landscape may be more regionally responsive, it also risks undermining the coherence, predictability, and standards that global institutions—however imperfect—once aimed to provide.

The road ahead

The coming months—particularly April’s IMF and World Bank Spring Meetings in Washington, DC—will provide crucial insights into the trajectory of global economic governance. The Trump administration’s review of US membership in international organizations also will be a defining moment: Will US actions and global reactions bring about a complete retreat from multilateralism, or will international financial institutions adapt to new geopolitical realities?

One thing is clear: The global financial order is at a tipping point, and the choices made today will shape the economic landscape for decades to come.

Ferid Belhaj is a senior fellow at the Policy Center for the New South. He served as World Bank vice president for Middle East and North Africa from 2018 to 2024.

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Earlier this month, Hong Kong-based CK Hutchison Holdings announced that it would sell a range of global port assets, including the ones operating in the Panama Canal, to the US private equity firm BlackRock. The deal stunned officials in Hong Kong and their counterparts on the mainland, and not just for the deal’s nearly twenty-three-billion-dollar price tag.

Daily front page headlines in the South China Morning Post detailed the latest twists and turns of the unfolding drama. At the center is the company’s founder, Li Ka-shing. The ninety-six-year-old billionaire began his career selling plastic flowers in the 1950s and helped turn Hong Kong into a hub of global finance. In 2000, he was knighted by Queen Elizabeth and, according to press reports at the time, was considered more powerful than China’s then president, Jiang Zemin. Li took that influence and made a series of brilliantly timed investments in the Chinese mainland, understanding where the economic opportunity would be in the years ahead.

So it’s understandable why Chinese authorities felt blindsided by his decision to sell the port operations to an American company, right after US President Donald Trump claimed in his inaugural address that China was operating the Panama Canal and “we’re taking it back.” But the level of anger is perhaps what is surprising. An op-ed in the pro-Beijing Ta Kung Pao newspaper (which was then republished by Beijing’s Hong Kong and Macau office) called the sale an act of “betrayal of all Chinese people.” More commentaries have followed, which have called it an act of “submission” and “spineless groveling.” The fact that the deal was announced on the eve of the “two sessions,” China’s most important economic and political event of the year, just added insult to injury for Chinese President Xi Jinping and the Chinese Communist Party.

The entire situation puts both Hong Kong authorities and Chinese officials in a difficult spot. If they make any moves to block the sale—and it’s not even clear whether they could—it would confirm some of the worst concerns about the way Western businesses will be treated in Hong Kong following the passage of the National Security Law in 2020. Right now, Hong Kong is working hard to convince the West that it is still one of the world’s most important financial hubs. As a newspaper report the day I left proudly touted, Hong Kong was “still” the number three financial city behind New York and London. That effort becomes more difficult if this sale is a blocked.

On the other hand, Hong Kong has to show that it’s responsive to Beijing’s concerns. That’s likely why Hong Kong’s chief executive, John Lee Ka-chiu, has taken a balanced approach so far, issuing a statement on the need to weigh the legitimate concerns of society and the importance for businesses to follow the legal process. One of his predecessors, Leung Chun-ying, was less diplomatic, saying: “Do merchants have no motherland?”

Now, Hutchison is working to ensure the deal doesn’t get torpedoed. A report in the South China Morning Post last week said Hutchison would offer twenty-five Hong Kong dollars (about three US dollars) per share as a bonus to shareholders if the deal goes through. The news, unsurprisingly, sent the stock soaring.

At stake here is more than just ports. The challenge facing Hutchison is a microcosm of the tension between finance and national security that is about to play out around the world. Consider the facts. After his inauguration in January, Trump made clear that Chinese companies’ ownership of portions of the Panama Canal was unacceptable. At the same time, he launched a trade war that threatened to slow down global commerce—and hurt the profitability of major port operators such as Hutchison. Weeks later, BlackRock negotiated a deal for a range of assets held by Hutchison. Chinese media have been keen to highlight the longstanding friendship between Trump and BlackRock CEO Larry Fink.

So, what is a veteran businessman like Li supposed to do in a situation like this? He can sell his operations at a profit or wait until the situation deteriorates and he has to sell at a potentially lower rate. He (or members of his family now overseeing the day-to-day operations) likely knew the sale would upset the Chinese authorities, but he also couldn’t ask for permission in advance—likely believing that it wouldn’t be given. If Beijing pushed Hutchison to reject the deal, it would only confirm the suspicions Trump has about the national security priority China puts on port operations. It is truly a tangled geoeconomic web. 

The predominant sense in our private conversations during the week was that BlackRock and Hutchison will find a way to seal the deal. There’s too much money at stake, too many aligned interests, and the risks of it failing are too high both for Hutchison and, more importantly, for Hong Kong’s future.

But expect China to find ways to tighten its grip on these kinds of deals going forward. Xi has stated that the world’s reliance on advanced technologies from China would give his country leverage in an economic conflict in the years ahead. Just as important as new technology is hard infrastructure—and Xi knows that, as well. Beijing does not want to be caught blindsided again. The outrage about the ports deal communicated from Beijing in both Chinese and Western media is meant in part to stop any other company from considering something similar. In Hong Kong last week, I could tell that message was being received loud and clear. 

Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

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Today, Washington is once again chattering about the possibility of a currency deal. This time, the venue may move south for what Trump’s incoming chairman of the Council of Economic Advisers, Stephen Miran, described as a “Mar-a-Lago Accord.” In a September report, Miran declared the overvaluation of the US dollar responsible for the “roots of economic discontent.”

Several in Trump’s inner circle have expressed an interest in devaluing the dollar to address the US trade deficit. Weak-dollar advocates believe that the strong dollar creates international trade imbalances, handicapping US manufacturers. A weaker dollar would make US exports more competitive.

But there’s a key difference between the countries that would gather in Palm Beach today and the group that met in New York in the 1980s—the countries that comprise the US trade deficit.

How will this different constellation impact any potential negotiation? It makes a deal much more complicated.

Miran and others want to use tariffs to get countries to the negotiation table. If these countries are worried enough about the cost of tariffs, Miran thinks they will be willing to make major changes to their currencies that they’d never otherwise consider. But Miran doesn’t stop there. He knows tariffs alone aren’t enough of a stick, so he thinks it is time to put the US security umbrella up for debate.

Miran argues that the security zone should be financed by the beneficiaries, and this can be leveraged to both depreciate the dollar and to mitigate the inflation effect of tariffs. Countries in the security zone should “fund it by buying Treasuries,” especially century bonds, and “unless you swap your bills for bonds, tariffs will keep you out.” US Treasury Secretary Scott Bessent has also discussed the idea that countries can enjoy shared defense as long as there are shared currency goals, while tariffs can be used for negotiation of terms. This administration seems at least open to the idea of linking the US security umbrella with the restructuring of the global trade system to benefit the United States.

The problem, of course, is that the countries the United States has the highest trade deficits with are no longer allies dependent upon this security umbrella. In 1985, the United States provided the security guarantee for France, Germany, Japan, and the United Kingdom. These signatories of the Plaza Accord hosted nearly a fourth of all overseas US military bases in the 1980s. Neither China, nor Mexico, nor Vietnam rely on the US military in 2025.

Without the incentive of shared security, are tariffs enough to push non-allies towards a currency agreement? It doesn’t seem to be for China. A major reason for resistance is that Beijing sees Japan’s experience after the Plaza Accord as a cautionary tale.

The “Japanification” of China?

The Plaza Accord forever altered the trajectory of Japan’s economy. The appreciation of the Japanese yen contributed to bursting Tokyo’s asset bubble and the lost decades of economic stagnation. At least, that is the lingering impression of the 1985 currency agreement in China.

There are certain similarities between Japan’s economic slowdown in the 1990s and the one that China is currently experiencing, such as deflation, low consumer demand, and capital flight. In January, China’s thirty-year government bond fell below that of Japan’s for the first time, and over the weekend, China’s inflation dropped below zero again. China is willing to go to lengths to avoid a “Japanification” of its own economy, including refusing to appreciate the renminbi against the dollar, even if it means weathering a protracted trade war.

China has previously raised concerns about the US dollar’s role as the dominant reserve currency and wouldn’t necessarily complain if the dollar’s preferential position in foreign reserves and global finance weakened. But with persistently sluggish consumer demand, China is still counting on the export sector to help drive economic growth in 2025. Beijing won’t want to risk any changes to the renminbi that would decrease the competitiveness of its exports in the midst of a trade war.

The idea of a Mar-a-Lago Accord is going to appeal to Trump. After all, he was the man who bought the Plaza Hotel in 1988, right after the famous agreement. But getting there is going to require more than just tariffs and a threat to remove security guarantees. China is going to have to see what’s in it for them. And that, so far, remains a mystery.

Josh Lipsky is the senior director of the Atlantic Council GeoEconomics Center and a former adviser to the International Monetary Fund.

Jessie Yin is an assistant director with the Atlantic Council GeoEconomics Center.

This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Now the United States begins a trade war with its three largest trading partners, and the costs could start piling up. 

Monday’s reaction—the worst trading day since Trump was elected—was Wall Street quickly trying to make up for lost time since the election. This is only the beginning. Markets could remain shaky if deteriorating consumer sentiment translates into less spending and price hikes on everything from gas to cell phones come into effect in the coming weeks.

Why did many on Wall Street seemingly miss the signs that Trump was going to pull the trigger on tariffs? Because they were stuck in a mindset based on the previous Trump administration. In his first term, Trump often used the threat of tariffs to negotiate—see the China Phase One deal, for example—and implemented tariffs on a wide range of products. But in Trump’s second term, the president and his senior trade adviser Peter Navarro are approaching changes to trade on an even more sweeping scale and accelerated timeline. 

Trump is now wielding tariffs in three distinct ways. Here’s how to think about them.

First, there’s “tariff as a negotiating tactic.” This is the kind of deal Wall Street thought Trump was trying to get with his threats against Mexico and Canada, mirroring what happened frequently in his first term. Those deals will still happen. China, for example, is a leading candidate for a renewed trade deal, despite Monday’s announcement. 

The second form is “tariff as tariff.” Trump and his team are approaching tariffs with the traditional view that a tariff can generate domestic manufacturing by raising costs on importers and therefore incentivizing production in the United States. The challenge with this plan is that for many products (such as laptops), it would take a much higher tariff than even 25 percent to make it cheaper to produce them in the United States. While some companies are announcing efforts to move production back to the United States, it will take years to reorient associated supply chains. In the meantime, it is US consumers and companies that will end up paying higher prices—at a moment when inflation is proving a little more sticky than Trump, or the Federal Reserve, anticipated. 

The other challenge is that Trump wants to use tariffs as a source of revenue. The Committee for a Responsible Federal Budget estimated in February that the Trump administration’s new tariffs could raise over one hundred billion dollars per year (and therefore possibly offset some of the cost of the coming extension of the Tax Cuts and Jobs Act). That still would only represent approximately 2 percent of total US revenue. And there’s a contradiction here. If the United States is collecting revenue on tariffs, that means the companies paying the tariffs aren’t actually reshoring. Instead, those companies are paying the higher cost for tariffed goods because doing so still makes the most sense for their businesses. The traditional use of tariffs can boost revenue or reshoring, but it’s very difficult to do both.

The third form of tariff is a new development in Trump’s second term. It is “tariff as punishment.” In Trump’s press conference on Monday, he specifically said several times that Canada and Mexico were going to be “punished.” What does tariff as punishment mean? It’s a form of sanction. Instead of financial sanctions, which Trump argued during the presidential campaign were causing countries to move away from the US dollar, expect the administration to use tariffs more as a tool of coercive economic statecraft. The benefit, from the Trump team’s view, is that unlike the on-and-off switch of sanctions, tariffs can be ratcheted up (5, 10, 15 percent) or ratcheted down. A recent example of this approach to tariffs came when Trump threatened a 150 percent tariff on any country from the BRICS grouping of emerging economies that was moving away from the dollar.

Trump’s second term is going to feature much more use of the latter two kinds of tariffs than his first term did. Trump told the public as much when he decided to leverage the International Emergency Economic Powers Act to give himself the authority to issue tariffs without any notice—an unprecedented use of the law. There will be negotiations, of course. It’s possible the new Canada and Mexico tariffs will only be temporary and become part of deal-making to renew the US-Mexico-Canada Agreement in 2026. But there will also be more tariffs for tariffs’ sake, more tariffs as punishment, and therefore more retaliation from other countries. It all adds up to the risk of a global trade war. In the coming weeks, deadlines are approaching for the next wave of steel and aluminum tariffs and a key report on reciprocal tariffs from the Office of the US Trade Representative and Commerce Department, which will provide the framework for possible actions against nearly every country in the world.

As of today, the United States has the highest effective tariff rate it has had at any time since 1943. Wall Street missed the early signs that Trump was serious about imposing tariffs. Now that investors have woken up, expect a bumpy ride ahead—in trade, in markets, and for the global economy.

Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

Sophia Busch and Charles Wheelock contributed to the data visualization in this article.

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The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report paints a dire picture of the possibility of avoiding the 1.5 degrees Celsius (°C) rise in global surface temperature. According to this report, “global warming is more likely than not to reach 1.5°C even under the very low [greenhouse gas] emission scenario” and it will be “harder to limit warming below 2°C.” The report provides strong evidence that, based on the current trends of greenhouse gas (GHG) emissions around the world, 1.5°C will be reached before 2040, which is a bit more optimistic than a 2023 article published in the journal Nature, which estimated the world will reach 1.5°C by 2029, leaving the global community with a mere five-year runway. Yet, a recent report by the European Commission warns that we already passed the 1.5°C-mark in 2024. The IPCC report also highlights the fact that there is a massive shortfall in the level of financial flows needed to achieve climate targets in different countries and sectors.

The link between social and physical infrastructure and economic growth and stability is un-disputable. However, the scale of financing required to meet the Sustainable Development Goals (SDGs) and establish climate-resilient infrastructure for the future global economy is the subject of widespread estimation and debate. These projections differ significantly based on various factors, such as the target year (2030, 2040, or 2050), the specific areas of focus (whether traditional infrastructure, SDG priorities, or the energy transition), and the underlying assumptions shaping the analyses. Despite these variations, one undeniable truth emerges: the financing gap is projected to reach trillions of dollars annually over the next ten to thirty years. This gap has been growing wider with the rising population (and, hence, growing needs for new infrastructure and maintaining the existing ones) and the increasing frequency of severe climate, destroying current critical infrastructure in many countries and negatively impacting their operations in others. Hence, the world not only needs to bridge the financing gap for building and maintaining basic infrastructure—between 1–4 billion people lack dependable access to electricity, water, internet, and sanitation—but old infrastructure must be climate proofed and new infrastructure must be built with climate resiliency in mind. Without bridging this massive and growing SDG and infrastructure financing gap, global growth will come to an eventual halt in just a few decades. 

This presents the global economy with the enormous challenge of funding its sustainable development and infrastructure needs. Given the magnitude of these gaps, it is evident that states, multilateral development banks (MDBs), and international financial institutions (IFIs) alone cannot bridge them. Therefore, there is an urgent need for innovative alternative financing solutions, namely from private sources. 

This report aims to provide a nuanced analysis on this very topic. Section 2 provides a holistic review of the investment gaps in global infrastructure, energy transition, and achieving SDGs. Section 3 highlights several challenges as they relate to de-risking, leveraging ratios, and potential sources of financing. Section 4 presents the case for making infrastructure an asset class that would attract private investment. Section 5 concludes the report. 

Amin Mohseni-Cheraghlou is a Senior Lecturer at American University and a former Senior Advisor at IMF’s Office of Executive Directors.

Nisha Narayanan is a senior fellow at the Atlantic Council’s GeoEconomics Center and is the head of country risk at a global financial institution.

Hung Tran is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center and and senior fellow at the Policy Center for the New South.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post Financing the future: Unlocking private capital for global infrastructure and climate goals appeared first on Atlantic Council.

The limitations of the Group of Twenty (G20) “Common Framework” have been extensively discussed and actionable solutions have been put forward. Tackling those limitations of the Common Framework is crucial for countries currently in debt distress, which experienced “significant delays” in the obtention of debt relief. As stressed by Kristalina Georgieva, managing director of the International Monetary Fund, “The framework can and must deliver more quickly.”

What’s hampering progress? Coordination issues, for one thing, but numerous voices also point to China’s role in hindering progress toward resolving the global debt crisis. The People’s Republic of China—a member of the IMF—has not only lent significant sums to borrower nations but also has the capacity to slow down processes because of the preferential terms in its lending agreements.

Overall, 147 countries—representing two-thirds of the global population and 40 percent of the world’s gross domestic product (GDP)—have either benefited from China’s Belt and Road Initiative (BRI) projects or shown interest in joining the program. By 2023, Chinese investment had begun to rebound since China’s zero-COVID policies, but China’s resistance to debt relief for its low-income borrowers will fuel sovereign defaults for years to come. China has spent an estimated $1 trillion through the BRI, thereby considerably strengthening its influence across Asia, Africa, and Latin America. Laos, for instance, owes almost half of its external debt (65 percent of its GDP) and is struggling to repay the debt that financed infrastructure like the high-speed Laos-China railway. China’s ownership of around 17.6 percent of Zambia’s external debt also slowed down Zambia’s debt restructuring negotiations significantly, contributing to a lengthy negotiation of two and a half years.

This piece outlines how China’s lending practices harm low-income borrowers and hinder debt restructuring negotiations through the use of debt clauses giving it de facto seniority. It further outlines ways for the Bretton Woods institutions to collaborate to change these dynamics and improve financing prospects of borrower countries and a more level field for lenders.

Lili Vessereau is a Research Scholar, Teaching Fellow and Fulbright Scholar at Harvard University, where she focuses on sovereign debt and macroeconomic impact of climate change.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Issue Brief Oct 9, 2023

How the IMF can navigate great power rivalry

By Hung Tran

Fragmentation resulting from geopolitical competition between large economies is posing a serious challenge to the fulfillment of IMF’s core missions. Here’s how it can respond.

China Economy & Business

Issue Brief Apr 16, 2024

Geoeconomic fragmentation and net-zero targets

By Shirin Hakim and Amin Mohseni-Cheraghlou

This report outlines how the Bretton Woods Institutions can mitigate the effects of growing geoeconomic fragmentation on global net-zero targets.

China Climate Change & Climate Action

The post Toward equitable debt contracts: Preventing de facto seniority-clause escalation in the sovereign lending space appeared first on Atlantic Council.

On March 3, Rob Murray, non-resident senior fellow at Forward Defense, appeared on Bloomberg News to discuss the Defence, Security and Resilience (DSR) Bank. As the founder of DSR, Murray emphasized the need for a global multilateral financial institution dedicated to defense funding, addressing the critical gap that is believed to be threatening Western security.

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Rob Murray

Nonresident Senior Fellow

Forward Defense Scowcroft Center for Strategy and Security

Defense Industry Defense Policy

Forward Defense leads the Atlantic Council’s US and global defense programming, developing actionable recommendations for the United States and its allies and partners to compete, innovate, and navigate the rapidly evolving character of warfare. Through its work on US defense policy and force design, the military applications of advanced technology, space security, strategic deterrence, and defense industrial revitalization, it informs the strategies, policies, and capabilities that the United States will need to deter, and, if necessary, prevail in major-power conflict.

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The global economy and international financial system have evolved dramatically since the founding of the Bretton Woods system in 1944. A trend toward greater trade openness defined the decades following the establishment of the system. And while the Bretton Woods arrangement of fixed exchange rates was abandoned in 1973, this new international economic order continued to facilitate global economic integration and financial liberalization. Yet the trend of ever-more globalization, which has largely defined the past fifty years, appears to have stalled. Trade openness has remained effectively flat since the global financial crisis (GFC) (figure 1a), while cross-border assets have trended down or sideways since the COVID-19 pandemic and Russia’s 2022 invasion of Ukraine (figure 1b).

By fostering financial stability and supporting economic growth, the International Monetary Fund (IMF) provided a stable foundation which supported this trend of increased cross-border trade and investment. The IMF, through its surveillance and lending operations, was established to act as an impartial referee to ensure that member countries pursued sound economic and financial policies. It also expanded the global financial safety net (GFSN) – which acts as an insurance mechanism to provide liquidity to countries facing economic crises. The IMF, as the lender of last resort to the global economy, acted as the primary provider of crisis support up until the GFC.

This postwar system, of which the IMF was a core component, supported decades of economic prosperity, broad-based increases in living standards, and a marked decline in global poverty rates. However, the global economy had no shortage of crises in the intervening years. Experiences ranging from the Latin American debt crisis to the Asian financial crisis have incrementally eroded the IMF’s credibility and led member countries to seek alternative insurance mechanisms that do not come with “strings attached” (e.g., IMF program conditionality), thereby reducing member countries’ reliance on the IMF.

The onset of the GFC led countries to double down on self-insurance mechanisms. It also led to a substantial diversification of the GFSN, as bilateral swap lines (BSL) and regional financing arrangements (RFA) overtook the size of IMF resources in the safety net. To safeguard economic stability and protect against external shocks in the wake of the GFC, country authorities enacted capital controls, referred to as capital flow management measures (CFMs) in IMF parlance, in addition to accumulating foreign exchange reserves. This use of CFMs and international reserves as a self-insurance mechanism was further amplified by the COVID-19 pandemic and its associated financial distress. 

Now, following the economic and financial disruptions stemming from Russia’s invasion of Ukraine and rising geopolitical tensions, countries are increasingly utilizing industrial policies and current account restrictions to direct and manage trade flows as well – a trend that is best illustrated by the broad threat (and imposition) of tariffs that President Trump has made during the first month of his second term. These restrictions on capital and trade flows have contributed to the stalling of global integration and will likely result in greater volatility across the global economy in the coming years. Moreover, the displacement of the IMF as the anchor of the GFSN calls into question whether the GFSN can and will provide equitable support to all countries facing economic crises. As the global economy and international financial system enter a new era—characterized by increasing fragmentation rather than integration—ensuring that the international system has an effective insurance mechanism is more important than ever. 

This report is organized as follows. In Section II, I document the rise in fragmentation across capital and trade flows. Section III discusses how the emergence of these fragmentary forces has coincided with changes in the size and composition of the GFSN. Section IV explores how these forces of fragmentation could affect global development prospects and financial stability at the country- and system-level. Section V concludes with policy recommendations to revitalize the IMF and preserve the core insurance mechanism which underpins global development and financial stability. 

Patrick Ryan is a Bretton Woods 2.0 Fellow with the Atlantic Council’s GeoEconomics Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Issue Brief Oct 9, 2023

How the IMF can navigate great power rivalry

By Hung Tran

Fragmentation resulting from geopolitical competition between large economies is posing a serious challenge to the fulfillment of IMF’s core missions. Here’s how it can respond.

China Economy & Business

Issue Brief Apr 16, 2024

Geoeconomic fragmentation and net-zero targets

By Shirin Hakim and Amin Mohseni-Cheraghlou

This report outlines how the Bretton Woods Institutions can mitigate the effects of growing geoeconomic fragmentation on global net-zero targets.

China Climate Change & Climate Action

The post Fragmentation and the role of the IMF appeared first on Atlantic Council.

Introduction

Mr. Chairman, Ranking Member Waters, and Members of the Committee, thank you for inviting me as a witness to today’s hearing.

My name is Martin Mühleisen. Before joining the Atlantic Council’s GeoEconomics Center as a Nonresident Senior Fellow, I retired from the International Monetary Fund (IMF) in 2021. I was Chief of Staff under Managing Director Christine Lagarde, and I served as Director for Strategy, Policy and Review between 2017 and 2020. The following are my personal views, not those of the Atlantic Council.

Multilateral financial institutions

International Financial Institutions (IFIs), such as the IMF, the World Bank, and regional Multilateral Development Banks (MDBs), have been important tools for the United States to exert its global leadership. Unlike the United Nations with its “one country, one vote” system, these institutions are shareholder-owned, and voting power is determined by shareholdings. The United States, in almost every circumstance, owns the largest share and, especially in the case of the IMF and World Bank, is the only country that holds a veto over changes to the institutions’ fundamental governance arrangements and lending capacity.

The institutions are chartered for specific, narrow purposes. The World Bank and MDBs borrow in global capital markets to finance economic development in emerging and developing countries. The IMF’s mandate, financed by issuing reserve assets to its member countries, is to preserve global economic stability by addressing external imbalances and serving as a lender of last resort to prevent balance of payments crises.

China’s role in the IFIs

The People’s Republic of China assumed China’s seat at the IMF and World Bank in 1980, and it joined other MDBs over the course of the following decades. It has broadly supported the mandates of these institutions and, like many other shareholders, contributed supplementary resources to help fund training, technical assistance, or interest rate subsidies for the poorest countries.

As China’s economy has grown to rival that of the United States, its voting share in the IMF and World Bank has not risen accordingly. Relative to its size, China is now significantly underrepresented in these institutions, along with a number of other emerging markets. This has been the subject of intense debates about IFI governance arrangements in recent years. Nevertheless, China joined a broad consensus last year to increase the IMF’s capital ( “quotas”) without any realignment of voting shares.

China As a Sovereign Lender

As it grew in size, China has also become the largest sovereign lender to emerging and developing countries over the past two decades, spurred on by President Xi’s Belt-Road Initiative (BRI) that started in 2013. China’s lending volume since 2000 is estimated at $1.3 trillion, approaching the total amount provided by the G7 over the same period.More recently, the People’s Bank of China has also acted as a lender of last resort, offering about $600 billion worth of bilateral renminbi swap lines to some 30 countries.

China did not grown its loan portfolio out of altruistic motives. It has used its creditor relationships with emerging markets and developing countries to export construction and other services; to obtain access to natural resources, ports, and other facilities; and to attract diplomatic support for its geopolitical objectives. For example, about 70 countries, many of them in the Western Hemisphere, have officially endorsed China’s sovereignty over Taiwan.

What This Committee Could Encourage

Hold China responsible for bad lending decisions

As a large and relatively new international lender, China has repeated many of the mistakes of other countries that went before it, including in the design of its lending programs and in the way that it manages relations with distressed borrowers.

BRI loans and the associated projects have been plagued by quality problems, lack of transparency, and quasi-commercial financial terms. Many loans have become distressed as a result, contributing to rising debt vulnerabilities in low-income countries. In a number of cases, this has put an effective stop to lending by multilateral lenders, who cannot lend to countries with an unsustainable debt burden.

A number of borrowers have remained in limbo for several years because China refused to participate in collective debt restructuring exercises, preferring instead to bilaterally extend maturities or modify interest rates rather than providing comprehensive debt relief.

Since China has joined the G20 Common Framework for Debt Restructuring in 2020, the speed of debt workouts has picked up somewhat. Nevertheless, there is still a lack of coordination among China’s state lenders, and there is a fundamental unwillingness to agree to loan write-downs that are sometimes necessary to restore countries’ solvency (not unlike under Chapter 11 of the US Bankruptcy Code), resulting in long workout periods that put an undue burden on debtor countries and other lenders.

The United States should use its voice in the IMF to adopt a more forward-leaning approach when it comes to the restructuring of Chinese loans. Besides insisting on improved transparency, the US Treasury should encourage the IMF to adopt a more forceful approach in cases where China’s reluctance to engage in meaningful restructuring effectively grants it a hold over IMF program loans.

For example, the IMF’s “Lending into Official Arrears“ (LIOA) policy allows the institution to resume lending to borrower countries that are in default to one of its members, provided they engage in good faith negotiations and other loan conditions are met. At the moment, the burden on countries to benefit from this policy is relatively high, given the risks for them to default on one of their largest lenders and trading partners. A more robust application of the LIOA policy, however, could strengthen the negotiation position of debtor countries and provide for more ambitious debt relief from China.

Focus on quality, not quantity, of IFI programs

Following the Covid epidemic, and in order to help countries respond to global climate, food, and energy crises in recent years, the World Bank and MDBs have been looking to leverage their capital base to step up climate and development loans, including with private capital, and the IMF issued $650 billion of Special Drawing Rights (SDRs) to its membership in 2021 to boost global liquidity. At the same time, the fund has channeled some of the newly created SDRs of its richer members into its concessional loan programs.

These efforts were intended to meet emergency financing needs of poorer countries, often involving little or relatively weak conditionality. There is a risk, however, that an increase in debt owed to multilateral institutions, who enjoy preferred creditor status, could worsen the overall debt situation of recipient countries as it may drive away private creditors. Moreover, the increase in global interest rates from the zero rate-environment a few years ago also implies that programs and projects need to meet a higher standard to help countries escape from debt distress.

To attract private capital and decrease their reliance on Chinese lenders, recipient countries need to improve their long-term growth prospects, which should be reinforced through strong loan conditionality focused on improving legal systems, streamlining regulations, and limiting government involvement in the economy, among others.

At the IMF, the United States should insist on prioritizing “upper-credit tranche” (UCT) programs, where a country must undertake necessary economic reforms to qualify for disbursements. At the World Bank, this could involve some rebalancing of its focus on global public goods toward more ambitious growth objectives.

Given the still strong demographics in Africa and Southeast Asia, investing in these regions will open up market opportunities for US exporters in the future. However, stepped-up lending by multilateral organizations alone will not be enough to win the struggle for hearts and minds in the Global South.

The United States and other large shareholders should therefore work with multilateral lenders to incentivize critical reforms and boost growth prospects in partner countries. If multilateral programs were flanked by bilateral co-financing, investment finance, specific trade preferences, or other forms of (geopolitical) incentives, they would have a larger chance to succeed.

Protect the dominant role of the dollar

I have so far focused mostly on low income and developing economies, in part because large emerging market (EM) countries exhibited a remarkable degree of macroeconomic stability in recent years. Many EMs tightened monetary policy early in 2021 in the face of inflationary pressures, and they were able to relax policies quickly after the shock receded.

In most cases, there was no need for full-fledged IMF/World Bank programs during this period, as there has not been for several years, although some countries in the Western Hemisphere made good use of the precautionary credit lines offered to IMF member countries with high-quality policies and a strong economic track record.

Two factors contributed to this positive outcome. First, many EMs acquired large foreign exchange reserves in the wake of the Asia and Global Financial Crises, making them more immune to speculative attacks; and second, countries pursued orthodox macroeconomic policies, with a focus on strong institutions, responsible fiscal policy, and flexible exchange rate management.

In principle, however, many EMs are still vulnerable to external shocks, especially under a combination of financial market volatility and rising tariffs and trade barriers. Most are not benefiting from dollar swap lines offered by the Federal Reserve, nor are they members of powerful regional currency arrangements (in South-East Asia, the Chiang Mai Initiative (CMIM) provides for some regional support, but this is largely tied to IMF programs). In case of a severe crisis, these countries would need access to US dollar sources to supplement their own reserves in order to avoid sharp currency devaluations.

In this case, the IMF could deploy its lending capacity of around $1 trillion to stabilize countries’ balance of payments, avoid wider contagion, and thereby preserve global financial stability. These funds are available through IMF programs or precautionary lines at relatively short notice, leveraging the United States’ financial contribution to the IMF by a factor of more than 5:1.

Absent the safety net provided by multilateral institutions, countries would only have two viable alternative to protect themselves against larger shocks. They would either have to acquire additional foreign exchange reserves, putting upward pressure on the US dollar, or they would need to seek help from China with its large currency reserves, which could in the long run be a factor in undermining the dominant role of the US dollar.

It would therefore be in the US interest if Congress were to ratify the IMF quota increase agreed last year, shifting a good part of the funds already contributed to the IMF’s New Arrangements to Borrow fully into its permanent capital.

A final word

When talking about the multilateral institutions, the focus usually lies on their finances and program activities. What is often overlooked is that these institutions are at the center of a worldwide network of country officials, financial market participants, and policy experts who are committed to market-based economics, global trade, free capital flows and responsible macroeconomic policies.

It is therefore no accident that emerging markets have become more stable in recent years. While this is an achievement on the part of each individual country, in many cases it has been spearheaded by officials that spent some years during their career working at multilateral institutions and/or continuing to benefit from close interaction with them. The transmission of knowledge through these contacts, as well as the large amount of technical assistance and training provided by multilateral institutions, are a public good that benefits the United States in many ways, and is unlike anything that China has to offer.

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Martin Mühleisen

Nonresident Senior Fellow

GeoEconomics Center

Digital Currencies Economy & Business

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Click to jump to an expert analysis:

Josh Lipsky: Trump just put the world on notice

Dan Mullaney: This could be a game-changer for how the US imposes tariffs

Barbara Matthews: Reciprocal tariffs will hit Europe the hardest

Mark Linscott: India could be the first test case for negotiations under this plan

Trump just put the world on notice

Today’s action is not mere negotiating posture—this is the Trump administration putting nearly every country on notice. If you wanted to do widespread reciprocal tariffs across the world, you would ask the Office of the US Trade Representative and the Department of Commerce to come up with a list of recommendations and you would invoke all legal authorities at your disposal, including the International Emergency Economic Powers Act, to justify the action on national security grounds. That’s exactly what they’ve done today. 

So none of this should be dismissed as merely another Trump “wait and see” announcement. Will every country that tariffs the United States face reciprocal tariffs in April? No—several will find ways to delay, exempt, or negotiate. For example, it will be worth watching what Indian Prime Minister Narendra Modi brings to the table today as he visits the White House. But my bet is that many countries will not be so fortunate. Instead, they will face real and meaningful tariffs this spring, just as the world’s finance ministers gather in Washington for the International Monetary Fund-World Bank spring meetings. It’s the first time many of them will meet the Trump team, including Treasury Secretary Scott Bessent, and it is going to make for a very fraught first meeting. 

—Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

This could be a game-changer for how the US imposes tariffs

Depending on exactly how it is implemented, the “Fair and Reciprocal Plan” could be a game-changer in terms of how the United States imposes general tariffs. Under the current most-favored-nation approach under the World Trade Organization (WTO), members have negotiated tariff rates among more than 160 countries that they apply without discrimination to other WTO members. This plan could mark a change to an approach where general tariffs are imposed and negotiated country by country on a bilateral reciprocal basis. It appears to upend how tariffs have been negotiated and imposed since the General Agreement on Tariffs and Trade came into existence. The most-favored-nation approach was designed to encourage a reduction in global tariffs; it’s fair to conclude that that has not happened since the initial negotiations, so some frustration is perhaps understandable. In some cases, the reduction in tariffs triggered other non-tariff barriers to trade, so the desire to calculate tariff equivalents of those barriers is perhaps also understandable.

The prospect of reciprocal tariffs can also be viewed as the ultimate bargaining tool, essentially saying: “Lower your tariffs to our current levels (and eliminate other barriers that may be identified and turned into tariff equivalents) and face no consequences.” The larger problem for WTO-focused members is that any reductions in tariffs would have to apply to all WTO members. So the European Union (EU) might be happy to lower its 10 percent tariff on autos to the United States’ 2.5 percent rate, given that the United States poses no threat to the EU’s auto business. But that rate would also apply to South Korea, Japan, and China, which do pose a real threat. 

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He previously served as assistant US trade representative for Europe and the Middle East.

Reciprocal tariffs will hit Europe the hardest

European economies will be the most adversely impacted by the reciprocal tariff action. Within twenty-four hours, the Trump administration has articulated a broad-based pivot away from Europe, both with respect to NATO and with respect to trade. The US government has made clear its intention to revive the pre-World War II, pre-Bretton Woods trade paradigm, in which tariff policies are set reciprocally, without multilateral engagement. 

The global consequences will extend well past economics and trade. The great success of the EU project is that Europe is no longer a junior partner to the United States on the global stage. The great question for 2025 is whether European and US leaders can find a way to redefine their special, strategic relationship for mutual benefit. The great risk for 2025 is that, instead, European and US strategic interests diverge over trade, climate, and other policy priorities.

Divergence is not impossible. The transatlantic trade relationship is uneven. Imbalances do exist, particularly as Europeans impose higher import tariffs on US goods than the United States does on imports from Europe. Imbalances will grow once the EU’s Carbon Border Adjustment Mechanism is fully implemented and once Europe achieves its strategic goal of eliminating reliance on liquefied natural gas imports. The United States may view these imbalances as creating a bargaining opportunity to redefine the transatlantic relationship, particularly given the great power competition underway with China alongside Russia’s war against Ukraine.

Ironically, the good news is that the bilateral transatlantic trade relationship is not governed by a free trade agreement, so no treaties are being abrogated by the tariff action with respect to the EU. This leaves room for strategic engagement on both sides. Nevertheless, the economic impact in Europe may be considerable. Europe’s economies face considerable challenges: lackluster growth, increasing energy transition costs, and economic difficulties resulting from the war in Ukraine. Disruption in the transatlantic supply chain will create additional pressures and tensions at a delicate moment for Europe. 

—Barbara C. Matthews is a nonresident senior fellow with the Atlantic Council. She is also CEO and founder of BCMstrategy, Inc and a former US Treasury attaché to the European Union.

India could be the first test case for negotiations under this plan

The president’s announcement today of a “Fair and Reciprocal Trade Plan” appears to be a blueprint for a monumental restructuring of the international trading system. It appears that it will initiate a process that could lead to new bespoke tariff schedules for some of the major trading partners of the United States, namely those that are viewed as the worst offenders in having high tariffs and running large trade surpluses with the United States.

That said, no new reciprocal tariffs will be imposed immediately, and the process, led by the Office of the US Trade Representative (USTR) and the Department of Commerce, could take some time to run its course before final decisions are made on raising tariffs. What is clear is that this process will involve a comprehensive examination of all forms of trade restrictions applied by select countries, including the European Union, India, and Brazil, which were specifically called out in the White House fact sheet. USTR and the Department of Commerce will have to assess differential tariffs, all forms of non-tariff barriers, and discriminatory tax regimes—and quantify them so that new tariffs can be calculated on a country-by-country and product-by-product basis. That will be a huge undertaking.

What is only hinted at in the presidential memorandum and fact sheet is the possibility of negotiating new trade agreements with these countries to reduce their tariffs and other trade barriers. In fact, with the announcement coming on the day of Prime Minister Narendra Modi’s visit to Washington, India could be the first test case for negotiations that might mitigate the imposition of new tariffs. So we should all buckle up for what will be a wild ride as this plan is put into place.

—Mark Linscott is a nonresident senior fellow with the Atlantic Council’s South Asia Center. He was the assistant US trade representative for South and Central Asian Affairs from 2016 to 2018, and assistant US trade representative for the WTO and Multilateral Affairs from 2012 to 2016.

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This comes at a critical time for Syria following the collapse of the Assad regime late last year and the establishment of a new interim government led by Ahmed al-Shara, who headed the rebel group Hayat Tahrir al-Sham. Syria—and US regional and European partners—are relying on the United States to lead the way in sanctions relief efforts to allow trade and investment to flow into the country and bolster the state-building process. While limited sanctions relief was granted in the final weeks of the Biden administration, likely prompting the European Union (EU) to also recently ease economic restrictions, the Trump administration’s foreign assistance freeze has the potential to jeopardize Syria’s fragile recovery. 

In his confirmation hearing in January, US Secretary of State Marco Rubio previewed his priorities for an outcome in Syria that is favorable to US interests and, more importantly, for the people of Syria. Rubio described an endgame in which Syria is not a land bridge for Iranian proxies, a chessboard for foreign interventions, or an exporter of drugs and terrorism. On several fronts, the Trump administration should pick up where the Biden administration left off in helping Syrians to rebuild their country.

The United States should also use this critical opportunity in Syria to learn from the challenges of the past three administrations. While the strategic importance of Syria’s stability for the Middle East, European allies, and US adversaries has long been a point of bipartisan understanding, strategic outcomes in Syria have been ill-defined. US policy levers, from humanitarian aid and sanctions to military presence on the ground, were misaligned with US goals. Going forward, US humanitarian and economic assistance to the country should be better aligned with clearly identifiable goals that help the Syrian people while furthering US interests in a stable and peaceful Syria.

Reliance on foreign aid assistance in Syria

Humanitarian needs in Syria are at an all-time high—in 2024, 16.7 million people were estimated to require assistance, the largest number since the beginning of the civil war in 2011. Foreign assistance, particularly from the United States, has played a significant, lifesaving role in Syria in the last decade and a half. Despite this, the United Nations Office for the Coordination of Humanitarian Affairs recently reported ongoing and severe underfunding for the Syria Humanitarian Response Plan—with only 34.5 percent of its $4.1 billion funding requirements fulfilled as of the beginning of this year. 

The United States is the largest foreign aid provider to Syria, contributing more than $18 billion in humanitarian assistance since 2011, including $1.2 billion in 2024. Most of last year’s funding supported humanitarian and emergency response efforts, with $76.8 million for refugee and conflict victim support, $34.7 million for humanitarian aid like food and nutrition, and $20.2 million for emergency food assistance and related services.

US funding has been crucial in supporting humanitarian efforts on the ground in Syria. The White Helmets, an internationally-supported Syrian civil rescue organization, has received US support for critical operations across the country, including search and rescue missions, as well as health and protection programming. In the weeks since Bashar al-Assad’s fall, their critical work has included the clearing of unexploded ordnance across the country, which pose a severe threat to civilians, especially children, and have resulted in hundreds of deaths and injuries. The White Helmets have also prioritized securing and recovering chemical weapons stockpiles left by the Assad regime, activities which have since been halted by the recent pause, raising concerns over the ability to prevent the spread of chemical weapons in Syria and neighboring countries.

US aid has also played a critical role in managing Al-Hol and Al-Roj camps in northeast Syria, which house over 46,000 displaced individuals—primarily women and children—from former Islamic State of Islamic State of Iraq and al-Sham (ISIS) territories. Essential water and sanitation services managed by US-funded humanitarian staff were suddenly suspended, placing camp residents at greater risk of lack of access to safe drinking water, as well as water and vector-borne disease spread. Also alarming was the effect of the sudden pause on funding that contributes to the security and administrative management of major detention facilities holding close to ten thousand ISIS fighters in these areas, which raised concerns among counterterrorism officials about mass prison breaks and a potential ISIS resurgence. State Department officials quickly responded by granting exceptions for foreign aid cuts related to the management of these facilities. However, other sudden moves to withdraw aid in Syria or downsize the US military presence in the country could pose significant counterterrorism risks for the United States and its partners. It is in the United States’ broader interest to ensure security needs in Syria are met in order to prevent violent extremists from exploiting political vacuums.

What does the “stop-work” order mean for Syria?

The recent “stop-work” order has introduced significant uncertainty for ongoing aid and economic recovery efforts in Syria—and as a result poses risks to US interests in the region. While the order originally included a carve-out for emergency food aid, the exact scope and implementation of these exceptions remain unclear for Syria, raising concerns from the United Nations and aid groups about disruptions to critical forms of assistance globally. In response to this pressure, Rubio has since issued a waiver for “life-saving assistance,” which includes medical services, food, shelter, and subsistence assistance. Aid organizations, like the White Helmets and even US-based contractors and small businesses supporting US-funded programs abroad, are still navigating an unpredictable funding environment, making it difficult to plan for long-term relief and stabilization efforts.

This development comes in the context of previous US measures aimed at mitigating the impact of sanctions on humanitarian aid in Syria. The Biden administration had previously granted select sanctions relief to Syria for six months through the US Treasury Department to facilitate the provision of public services and humanitarian assistance. This relief applied to sanctions related to transactions with Syria’s government and the processing of personal remittances to the country through the Syrian Central Bank. This was followed promptly by a waiver to the Foreign Assistance Act relating to Syria’s designation as a state sponsor of terror for Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Turkey, the United Arab Emirates, and Ukraine. Not without its flaws, the move aimed to enable critical aid and development assistance in sectors ranging from energy and agriculture to technology and healthcare. Other countries, as well as the EU, are using a “step-by-step” approach to the lifting of sanctions on Syria as leverage to ensure the new government is meeting key indicators of a successful and sustainable political transition.

With the stop-work order now in effect, the future of US-backed humanitarian operations in Syria is now in question. The recent waiver issued by the State Department for this order notably does not include stabilization assistance—of which the United States has collectively contributed more than $1.3 billion since the start of the Syrian civil war in 2011—and is defined as multi-sectoral support to “local governance, essential services, and livelihoods and economic recovery.” Experts have noted that these efforts to promote stability in Syria in the coming months is contingent on indicators to the Syrian people that the economic conditions in the country are on the mend under the new government. It is therefore in the United States’ and its partners’ national security interests to aid postwar recovery in Syria to begin the process of improving US-Syria relations, facilitate the return of refugees and displaced Syrians around the globe, and ensure regional stability.

The Trump administration has also issued a series of executive orders on personnel at the State Department and USAID. The administration has placed senior career civil servants on administrative leave, fired institutional contractors, and pressured employees to resign. These include officials who have worked on Syria for over a decade and possess critical institutional knowledge on conflict stabilization, humanitarian assistance, and development in fragile economies.

Aid groups and policymakers are closely monitoring whether additional exemptions or funding adjustments will be made to prevent further disruptions to essential services. The potential consequences of prolonged aid suspensions could exacerbate existing humanitarian crises and create new security risks in a region already facing instability.

Ensuring a stable Syria

Syria is at a critical juncture in its history, and the next few months are essential for the country’s interim authorities to ensure national and regional stability. As Sinan Hatahet highlights in a piece for the Atlantic Council, the United States has an especially vital role to play in Syria’s recovery efforts as this “post-Assad honeymoon” phase fades. 

As other post-conflict contexts have demonstrated, foreign aid and stabilization programming—led out of the US State Department and USAID—will be instrumental in determining Syria’s trajectory. To facilitate a stable postwar recovery in Syria, the United States must ensure that US leadership in aid development is not in question. In addition to resuming existing aid programs, there are several steps the administration can take to improve its aid to Syria and better align it with US objectives.

• Evaluate how local programs fit into broader US policy and Syria’s evolving political situation.
• Ensure aid is aligned with local systems and development priorities as programs are renewed or new ones are developed.
• If unwilling for political reasons to increase US aid to Syria, continue Biden administration steps, including taking further actions to permanently roll back sanctions in Syria and to remove barriers for allies and partners to do so.

Postwar Syria faces a precarious economic and security situation and the United States’ assistance—or lack thereof—will play an outsize role in its outcome. For the sake of both the Syrian people and the United States’ interest in a stable and peaceful Syria that does not become a terrorist threat, it is imperative that US aid to Syria continue. 

Diana Rayes, PhD, is a nonresident fellow for the Syria Project in the Atlantic Council’s Middle East Programs.

Note: Some Atlantic Council work funded by the US government has been paused as a result of the Trump administration’s Stop Work Orders issued under the Executive Order “Reevaluating and Realigning US Foreign Aid.”

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The successes of the past twenty-five years are undeniable—since 2000, poverty has been cut in half and global gross domestic product (GDP) growth has more than tripled. However, the failures are real as well. The internet, for all the incredible ways it has reshaped trade and innovation, has also fueled long-simmering divisions within countries.

The world is searching for a new “Wright Brothers moment”—a transformational invention that not only enhances productivity but simultaneously inspires people to imagine what comes next. The internet made us look down at our phones; the Wright Brothers made us look up to the sky.

The question is, will the United States and its allies be able to reap the benefits of this century’s Wright Brothers moment? It will likely depend on the economics. From 1900 to 1925, the pound sterling lost its global reserve currency status, industrialization fueled the greatest period of globalization the world had known, and the United States emerged as an economic superpower.

Fast forward to 2025 and the United States has the strongest gross domestic product (GDP) growth of any advanced economy, its startups set the standards across the world, and its geopolitical rivals, including China, have shown since the COVID-19 pandemic that they are not, in fact, ten feet tall.

But the difference between success and failure will be decided in unexpected places. Below are five pressing questions about the global economy in the year ahead. The answers to each of these questions will help determine whether the next twenty-five years mark a supercharged quarter century or push the United States off its economic flight path. 

1. Will Trump try to fire the Federal Reserve chair?

For all the concerns about the future of the US dollar, one of the only real near-term threats would come from a lack of confidence in the Federal Reserve’s independence. What could trigger such a crisis? Check out our breakdown of how Group of Twenty (G20) countries handle the dismissal of their central bank chiefs: 

The good news is that President-elect Donald Trump has said he isn’t going to try to fire Federal Reserve Chair Jerome Powell before his term is up in 2026. The bad news is that he might be able to do it if he changes his mind. The closest the United States has come to testing the idea is probably President Lyndon Johnson asking his Justice Department if he could fire then Federal Reserve Chair William McChesney Martin in 1965.

If the US president proposes this idea, then expect markets to send a ferocious signal not to cross that line. A more likely outcome is that Trump will appoint a new Federal Reserve chair very early in his term, which will cause some confusion but not an outright crisis. 

2. What effects will new US tariffs on China have?

New year, new tariffs? New US tariffs on China are coming—that much is already clear. But to understand how they will impact the US economy, take a deeper look at the tariffs that Trump put on Chinese goods during his first administration. The chart shows how Mexico and Canada have now overtaken China as the top sources of goods covered under the previous Section 301 China tariffs (which included a range of agricultural and manufacturing products). 

If the goal of higher tariffs is friendshoring, or diversifying import sources to trusted partners, the data show that maybe there’s something to this whole strategy—even if it takes time. And it’s not just Mexico and Canada stepping up to replace Chinese exports—the next twenty top US trade partners have nearly all increased their exports to the United States regardless of geography, from South Korea to Germany, and from Vietnam to Brazil.

While the first wave of tariffs had to wait out a pandemic, the next wave may hit China faster and harder, and the rest of the world is ready to take advantage. 

3. Is China’s Belt and Road Initiative back in business?

It certainly looks that way. New data from 2023 show that it was the first year since 2016 that China’s loans to Africa increased compared to the year before. The analysis below shows how China’s economic slowdown, and the COVID-19 pandemic, conspired to curb spending over the past few years.

But now it appears that Chinese leader Xi Jinping is ramping the Belt and Road Initiative back up. And this time, the money that is being spent is in yuan, not US dollars. The focus has shifted to smaller projects and lower financing levels to avoid some of the defaults seen in earlier projects.

The question now is whether Trump tries to counter the Belt and Road Initiative with bilateral US spending or by organizing a Group of Seven (G7) alternative to Beijing. 

4. Will the Global South get more voting power in the IMF?

When the Atlantic Council hosted India’s finance minister, Nirmala Sitharaman, in Marrakesh in 2023, she said that India and the Global South would not accept another unfair arrangement at the Bretton Woods institutions on voting power. This year, her ultimatum will be put to the test. How would the distribution of power change if votes were finally reallocated in the International Monetary Fund? It’s not as clear as you might think: 

The United States would gain votes, as would China, if votes were distributed simply based on a country’s share of global GDP. The real formula is more complicated, but the chart above does help show how things could shift. India would gain a little, and most of the G7 would lose. Of course, Europe losing also costs the United States, as it would have fewer friends at the board.

There is, however, no clear path forward, and it’s hard to see Trump agreeing to anything that benefits China. But don’t expect Indian Prime Minister Narendra Modi or Xi to capitulate either. A new battle of Bretton Woods may be brewing.

5. What’s next for US dollar–backed stablecoins?

In 1971, US Treasury Secretary John Connally famously told a group of European finance ministers that the dollar was “our currency, but your problem.” Europe in particular is going to be thinking about that notion quite a bit in 2025. To understand why, see how dollar stablecoins are increasingly popular around the world: 

Last year was a big year for cryptocurrency; Bitcoin’s price reached one hundred thousand dollars in December, and the industry played a significant role in the US elections. But the focus in 2025 will shift to stablecoins. Today, $170 billion worth of stablecoins are in circulation worldwide, with 98 percent of those pegged to the dollar. 

But as the chart shows, about 80 percent of the flow of US dollar-backed stablecoins happens outside the United States. This is driven mainly by adoption in Europe (with Russia in the lead), in India, and in Southeast Asian countries, such as Vietnam, Singapore, and Indonesia, which are using stablecoins for remittance payments and as a way to access dollars. 

The result is that while the United States finally created a regulatory framework for these assets, other central banks and finance ministers are going to ask the incoming Trump Treasury department exactly what the plan is for all these new dollars floating around in their economies. 

Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

Sophia Busch is an assistant director at the Atlantic Council’s GeoEconomics Center.

Research and data visualizations provided by Jessie Yin, Mrugank Bhusari, and Alisha Chhanganni.

This article is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in receiving this newsletter, email
SBusch@atlanticcouncil.org

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Much has changed a year on from Milei’s inaugural—and memorable—assertion that “no hay plata!” (there is no more money [for public spending]). As Milei made front-page news, catching the attention of the Financial Times and the Economist, he has also earned the praise of world leaders such as Trump and members of the president-elect’s inner circle, such as tech mogul Elon Musk. Meanwhile, financial markets have continued to celebrate as Argentina’s stocks have roared upward, providing the highest yearly returns of any other economy and doubling those of the second-best performing markets (as expressed through country exchange-traded funds).

The government has doubtless made much progress in areas in which it was expected to struggle, restoring significant levels of confidence to an embattled economy that just a few days ago was officially announced to be out of a severe recession. As Argentina heads into a critical year for the government’s economic strategy, Milei will need to maintain voters’ buy-in and market confidence for his policies while pursuing further economic reforms.

2024: A triumphant first quarter of a four-year term

As Guido Sandleris, former president of the Central Bank of Argentina (2018-2019), argued in our 2024 Atlas, before Milei’s inauguration the Argentine president had correctly identified the country’s “real problems”: inflation, high and inefficient public spending, political capture, and endemic corruption, among others. For Sandleris, the challenges for the Milei administration were clear: The country was on the verge of hyperinflation, the central bank had negative net foreign exchange reserves, the fiscal deficit was out of control, and utilities and prices were long outdated, forcefully frozen in place by the previous administration. Milei had also come into office with a limited political toolbox, holding a minority in congress that was not even impeachment-proof and relying on a small party structure.

Considering this initial outlook, the results of the past year are noteworthy. The government instituted aggressive budget cuts, spending freezes, and a deregulation campaign. It also passed significant legislation (which revealed the government’s ability to negotiate with the opposition) and successfully implemented a tax amnesty scheme to attract undeclared banking deposits. In the wake of these policies, Argentina’s economy has gained a more solid footing and is on track for normalization. Inflation has come down to pre-2023 crisis levels, the economy is showing signs of recovery, consumer and investor confidence are on the rise, and government bonds have regained much of their value.

Two figures illustrate this success: the drop in Argentina’s emerging markets bond index spreads, which is a key measure of sovereign risk, and the rise of projected investment as a share of gross domestic product, both of which we have analyzed. But perhaps the most notorious achievement has been its commitment to fiscal responsibility, a laudable effort in the context of Argentina’s chronic tendency to incur unsustainable public spending.

Optimism is perhaps the best way to describe the current moment in Argentina, and recent opinion polls illustrate this. Milei has succeeded even in outperforming President Mauricio Macri, his most ideologically proximate predecessor, in his approval rating at the end of his first year in office across social sectors, according to Gallup. As Milei put it in an interview with the Financial Times in October, “I have a 50 percent approval rating after carrying out the biggest austerity program in our history. It’s a miracle, isn’t it?”

How can Milei finish out a strong first half in 2025?

Milei, who played goalie in soccer in his youth, understands that it’s critical to finish out a strong first half to win a match, and restoring Argentina’s macroeconomic stability was never going to be accomplished overnight. The question now is whether the administration will be able to maintain support for its policies while deepening its reform agenda. Next year’s midterm elections in October, in which the government aims to strengthen its vulnerable position in congress, will play a large role in setting the agenda for Milei’s second year in office.

Although the outlook is much brighter than it was a year ago, challenges still loom in 2025. The main objective will be to deliver growth, estimated at 5 percent by the International Monetary Fund (IMF), following two years of consecutive drops (1.6 percent in 2023 and an estimated 3.5 percent in 2024) while continuing to reduce inflation. And the latter is far from over: Banks estimate that prices will rise over 30 percent in 2025, while the government’s own more optimistic estimates in the 2025 budget proposal predict that prices will rise by 18 percent (annualized inflation in the United States this past November was 2.7 percent). Markets will also be watching the elections closely. If the economy fails to deliver much-needed growth and inflation remains stubborn, it could cause a sudden deterioration in market confidence. However, the opposition’s fragmentation, itself the result of the 2023 economic crisis and the disruptive victory of an outsider like Milei, may ease the administration’s path to make significant gains.

Nevertheless, the government has taken steps to mitigate risks and open new opportunities to strengthen the country’s economic recovery in the new year—nowhere more prominently than on the world stage. Milei scored several major foreign policy wins, including the beginning of its Organisation for Economic Co-operation and Development accession process. And the South American economic bloc Mercosur, of which Argentina is a member, signed a historic trade deal with the European Union earlier this month.

Argentina’s stocks reacted positively to Trump’s election in November, a clear sign of the market’s belief that the next administration will yield net positive effects for Argentina. Milei has developed a close relationship with Trump. The Argentine president has openly stated that he thinks Trump will play a decisive role within the IMF’s board to push for a favorable renegotiation of Argentina’s outstanding program with the IMF. This could include the disbursement of new funds and a rollover of repayment deadlines, as Argentina owes the IMF over forty billion dollars at a time when its net international reserves stand at negative three billion dollars). Indeed, US Senator Marco Rubio, Trump’s nominee for secretary of state, has argued that the United States should use its influence at the IMF to help restructure Argentina’s debt, which he said would “create breathing room for Milei to enact much-needed reforms.” One of the major sticking points in Argentina’s negotiations with the IMF is the Fund’s belief that Argentina should end its outdated system of currency controls (the “cepo”). Ending the cepo would likely spur growth and drive investment but may also put pressure on the peso—and thus reaccelerate inflation—something that the government will likely avoid until after the midterm elections in October.

At the same time, Argentina has reached a new moment in its relationship with China, a key trading partner, following months of tensions triggered by the president’s earlier critical rhetoric. Illustrating this case, in June, China renewed its currency swap with Argentina, saving the country from a sudden loss of much-needed foreign reserves. Chinese leader Xi Jinping and Milei then met for the first time on the margins of the Group of Twenty (G20) summit in November.

Domestically, important announcements such as the end of the recession and recent investments announced under the government’s investment promotion regime, including $2.5 billion from Rio Tinto for lithium mining and a multicompany investment of three billion dollars for a new oil pipeline, both of which happened just this month, indicates that rising investor confidence will begin to fuel the revitalization of Argentina’s historically low investment levels. This year was also significant for the country’s energy independence, and rapidly rising shale oil and gas production has saved the country billions in energy imports while boosting exports, a trend that will only deepen in coming years. Argentina has even started negotiations with Brazil, despite public tensions between President Luiz Inácio Lula da Silva and Milei, to explore the possibility of exporting Argentina’s booming natural gas production there.

Milei’s economic policies have exceeded expectations in the administration’s first year. But given its precarious starting point, Argentina is still vulnerable to external economic shocks and sudden losses of investor confidence. As such, the administration should consider moving forward with a series of key steps that may drive growth beyond post-crisis recovery values and further cement the market’s confidence in the economy. Such measures could include accelerating the end of the cepo and allowing the peso to float freely (and thus making Argentina less vulnerable to the ongoing devaluation of the Brazilian real). The government should take steps to reassure markets of its ongoing commitment to fiscal responsibility and healing its credit rating. These measures could include the negotiation of a new and sustainable IMF program, the passing of the long-delayed 2025 budget, and the continued elimination of special protections that for decades successive governments have awarded to uncompetitive segments of the economy.

The first year of Milei’s administration will be remembered as a surprisingly strong start to an ambitious reform agenda. For that agenda to be fully realized, Milei will need to continue to pursue bold reforms while maintaining public support and market confidence in 2025.

Ignacio Albe is a program assistant with the Atlantic Council’s Adrienne Arsht Latin America Center.

Jason Marczak is vice president and senior director at the Atlantic Council’s Adrienne Arsht Latin America Center.

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In May, US President Joe Biden announced a 100 percent tariff on all electric vehicles (EVs) imported from China. The administration had two main objectives: 1) Protect and stimulate US clean energy industries and supply chains, and 2) counter a flood of Chinese goods as Beijing turns to exports to compensate for its weak internal demand. For the United States, these tariffs are largely preventative and symbolic, as Chinese EVs make up only around 2 percent of total EV imports. For other Group of Seven (G7) countries, it’s too late for prevention, as Chinese EVs already dominate.

The Biden administration coordinated with concerned allies and, in August, Canada also announced it would levy a 100 percent tariff on EV imports from China. The European Union (EU) later imposed up to 45.3 percent tariffs on Chinese EVs. Economic stress due to Chinese dumping increasingly reaches beyond the United States––and even beyond the G7. Since 2023, Argentina, Brazil, India, and Vietnam have all begun anti-dumping or anti-subsidy investigations into Beijing’s practices. 

The incoming Trump administration will now have a choice. It can revert to President-elect Donald Trump’s previous preference for bilateral negotiations, or it can continue to restrict China’s access in step with allies and partners, possibly by creating a “buyers club” to regulate standards and open markets to a select few.

—Sophia Busch is an assistant director at the Atlantic Council’s GeoEconomics Center. 

In October 2024, the US Department of the Treasury issued final regulations implementing the Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern. Once it comes into effect on January 2, 2025, the Outbound Investment Security Program (OISP) regulations will prohibit or subject to notification requirements certain transactions involving Americans and persons affiliated with designated countries of concern (presently, China, including Hong Kong and Macau) operating in the semiconductor and microelectronics, quantum information technology, or artificial intelligence (AI) sectors (“covered foreign persons”). 

With respect to AI, the OISP will generally prohibit US persons from investing in a covered foreign person that develops any AI system trained using a quantity of computing power greater than ten septillion (10^25) computational operations (integer or floating-point operations). In addition, the OISP sets forth other computational thresholds implicating investment prohibitions (i.e., greater than 10^24 computational operations using primarily biological sequence data) or notification requirements (i.e., greater than 10^23 computational operations). Notably, regardless of computing power, covered transactions involving AI systems designed or intended for military, government intelligence, mass surveillance, cybersecurity, digital forensics, penetration testing tools, or the control of robotic systems end uses are also subject to prohibitions or notification requirements.

Absent practical guidance or enforcement history, exactly what these computing power thresholds mean in practice, as well as how they reasonably can be determined, remain to be seen. However, given its breadth, complexity, and enforceability, the OISP seems likely to have a significant effect—most notably with respect to US persons, but also in connection with the activities of certain foreign persons controlled by US persons or for which US persons serve in key roles. Such persons have until the new year to start making sense of what may be about 10^25 questions regarding their exposure under the OISP.

—Annie Froehlich is a nonresident senior fellow at the GeoEconomics Center and partner at Cooley LLP.

The 2024 meeting of the BRICS+ gathered the representatives of forty countries on October 22-24 in Kazan, Russia. This number is about four times the size of the BRICS+ (named for members Brazil, Russia, India, China, and South Africa), which expanded in 2023 to include Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia.

While the creation of a BRICS currency still appears unlikely, the bloc announced a substitute for Western payment systems called BRICS Clear. Circumventing sanctions or the extraterritoriality of US banks and, more generally, becoming less dependent on the US dollar are clear motivations behind such endeavors, as well as a growing interest in making bilateral arrangements to use China’s e-yuan.

Some notable leaders, such as Argentine President Javier Milei and Brazilian President Luiz Inácio Lula da Silva, were absent. But the attendees were a large and heterogeneous group, including both Turkey and North Korea. But without being officially opposed to the United States, the US dollar, or even the G7, the summit in Kazan visibly illustrated increasing global fragmentation. True, it took two world wars for the British pound to be dethroned by the dollar, and the latter remains dominant, representing about 60 percent of central banks’ official reserves, international debt, and credit. But in a multipolar world, could too much hegemony be its own undoing?

—Marc-Olivier Strauss Kahn is a nonresident senior fellow at the Atlantic Council and honorary director general at Banque de France.

Russia’s invasion of Ukraine laid bare a vulnerability in Europe’s energy strategy: an overreliance on a single supplier for critical resources. The EU is determined to avoid repeating the same mistake with lithium, a critical mineral often referred to as “white gold” for its indispensable role in the decarbonization race. However, the EU faces an uphill battle to reduce its near-total dependence on China, which currently supplies 97 percent of the bloc’s raw lithium.

With its ability to produce lithium at low cost thanks to cheaper labor, state-controlled financing, and energy subsidies, Beijing has flooded global markets and produced much more lithium “than the world needs today, by far,” according to Jose Fernandez, under secretary for economic growth, energy, and the environment at the US Treasury Department. To mitigate this monopoly, the EU has set ambitious targets, including producing at least 10 percent of its annual lithium consumption within the bloc by 2030. However, the region’s lithium mining projects are not expected to begin production until the end of 2026, leaving a significant gap in the interim.

As the world transitions to green technologies, lithium will remain a cornerstone of the global energy transition. For the EU, building a resilient, diversified supply chain is a strategic necessity.

—Grace Kim is a young global professional with the GeoEconomics Center.

Almost half of the world held elections in 2024. In Western democracies, opposition parties have won six out of fifteen decisive elections. Globally, more than half of incumbents or ruling coalitions managed to stay in power. However, unstable coalitions prompted multiple collapsed governments in Europe, including Germany and France.

Meanwhile, Russia’s efforts to interfere in Eastern European and Eurasian countries’ elections were a prominent but not unexpected problem. Russia’s direct and indirect interference in the Georgian parliamentary elections has been thoroughly researched and documented. Like in Georgia, the Moldovan elections were fraught with Russian disinformation and meddling, although pro-Western incumbent President Maia Sandu emerged victorious. Meanwhile, Romanian intelligence services declassified documents showing that the country’s elections have become the target of “aggressive hybrid Russian action,” including 85,000 cyberattacks on Romanian election websites. 

These instances of interference throughout 2024 demonstrated that Russia and other adversaries are invested in undermining elections as a fundamental principle of democracy. This is an opportunity for the United States and the EU to leverage positive economic statecraft tools to equip countries in Eastern Europe and Eurasia with secure election technologies and provide financial assistance to educate populations in identifying and thwarting Russian propaganda and disinformation. 

—Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @KDonovan_AC.

—Maia Nikoladze is the associate director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @Mai_Nikoladze.

—Mikael Pir-Budagyan is a young global professional at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center.

Since the start of the year, the cryptocurrency market capitalization nearly doubled from $1.65 trillion to $3.65 trillion. This year, the digital asset industry made significant inroads into the global economy, especially bitcoin and stablecoins. 

Bitcoin continues to dominate the digital asset market, accounting for more than 50 percent of the total market capitalization as the asset crossed $100,000 on December 4. On January 10, the US Securities and Exchange Commission approved the bitcoin spot exchange-traded funds, giving retail and institutional investors greater access to the asset—in November, a group of US bitcoin exchange-traded funds recorded $6.2 billion of inflow. Stablecoins also saw significant, use accounting for trillions of dollars of transaction volume every month. In October, Stripe acquired stablecoin platform Bridge for $1.1 billion, demonstrating what may be fintech firms’ bigger push into digital assets. 

Digital assets should be expected to see more mainstream adoption under the Trump administration and a Republican-led House and Senate, which have expressed a pro-crypto stance. This will likely result in more open-source developers in the United States and greater exploration by financial institutions. 

—Nikhil Raghuveera is a nonresident senior fellow at the GeoEconomics Center and co-founder of Predicate.

As interest rates hit twenty-year highs, developing countries paid out a staggering sum of $1.4 trillion to service their foreign debts. The details behind that headline are equally stark and troublesome. Interest payments alone amounted to more than $400 billion as rates surged. And, as with most shocks, the poorest countries and most economically insecure people have been hit the hardest as governments are forced to make tradeoffs between development and growth, and as spending is diverted from critical health, education, and infrastructure investments. Low-income economies eligible for the International Development Association (IDA) paid $96 billion in debt service; and their interest payments now amount to nearly 6 percent of the export earnings of IDA-eligible countries—a level that hasn’t been seen in more than twenty-five years. For some countries, the payments run as high as 38 percent of export earnings. And more money is flowing out than in. Since 2022, foreign private creditors took in almost $13 billion more in debt-service payments from public sector borrowers in IDA-eligible economies than they doled out in new financing. Multilateral banks have been playing a larger role, even as service payments, interest rates, fees, charges, and surcharges have come under scrutiny. 

For its part, the World Bank announced in advance of the Annual Meetings in October that it was lowering the minimum equity-to-loan ratio from 19 percent to 18 percent, freeing up $30 billion more in financing, removing certain fees, and lowering the price of loans for smaller economies. Meanwhile, the International Monetary Fund (IMF) announced a package of reforms to its General Resources Account lending that will significantly reduce the cost of IMF borrowing, which has compounded the crisis for many countries. The principal changes include a reduction of the margin over the Special Drawing Rights interest rate, an increase in the threshold at which surcharges apply, a lower rate for time-based surcharges, and a higher threshold for commitment fees. More than a third of General Resources Account (GRA) borrowers are currently subject to surcharges. By fiscal year 2026, the number of nations subject to surcharges is projected to drop from twenty to thirteen. Hefty savings for GRA borrowers are expected––$1.2 billion annually, or 36 percent.

––Nicole Goldin, PhD, is a nonresident senior fellow at the Atlantic Council’s Geoeconomics Center.

Nothing encapsulates China’s economic crisis better than the steep fall in government revenue from “land use” sales. Since peaking in 2021, the country’s booming real estate sector has fallen into a deep depression, with construction grinding to a halt in many cities and falling prices adding to deflationary pressures in the Chinese economy. That has proven devastating to China’s heavily indebted local governments, which have relied on the sale of “land use” rights for much of their operating income. The IMF estimated in 2023 that the debt of local governments and financing vehicles they’ve set up over the years to raise (and spend) money totaled more than 100 trillion yuan ($13.7 trillion). With an estimated fifty million residences sitting empty nationwide, many property developers having defaulted on debts, and local governments unable to pay their bills, Beijing is struggling to sustain economic growth.

—Jeremy Mark is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center.

In 2024, the US Department of the Treasury took the final steps to implement Biden’s Executive Order 14105 to create a targeted Outbound Investment Security Program. During the rulemaking process, Treasury initially estimated that 212 transactions per year could fall within the program’s jurisdiction. The public comment period apparently caused Treasury to raise their estimates to 318 to “account for the likely underrepresentation of potentially relevant transactions,” but the private markets are famously opaque and Treasury went on to concede that “precise data that matches the scope of potential covered transactions is not available.” Treasury’s revised estimate should still only implicate less than 1 percent of deal activity (by deal count, vice value). The question for 2025 is whether this small percentage is an accurate reflection of the program’s impact on US outbound investments and the costs of compliance.

—Jesse Sucher is a nonresident senior fellow at the Atlantic Council’s Economic Statecraft Initiative in the GeoEconomics Center. 

There is nothing like large, unilateral, and across-the-board tariff proposals from the United States to get tongues wagging and economic models churning. The latest tariff proposals from the president-elect are no exception. But maybe more important than the impact of such tariffs is the question of whether the EU should view these tariff proposals as weapons and threats directed against trading partners, or as tools of US domestic policy that result in collateral damage to the EU. Each characterization is credible, but the difference is huge in terms of the direction of transatlantic relations.  And once EU policymakers start to publicly own one narrative or the other, it is hard to go back. 

If the tariff proposals are viewed as weapons and threats, a reasonable EU response—and maybe the only one—is retaliatory tariffs, and to refuse to negotiate “with a gun to our heads” (in well-worn EU parlance). This would likely lead to tit-for-tat retaliation or even a trade war. If, by contrast, the EU views the tariff proposals as tools of US domestic policy that inflict collateral damage on the EU, then a reasonable response is an early bilateral discussion on other ways to achieve US domestic policy objectives, but with less or no collateral damage to the EU. 

Among the policy objectives for these and previous proposed tariffs are: addressing persistent goods trade imbalances, encouraging domestic manufacturing, raising revenue, and protecting against and disincentivizing nonmarket excess capacity. These are policy goals that the EU and other trading partners can understand (and even arguably share), even if they disagree that tariffs are always a good way to achieve them. Indeed, some of these goals—like addressing the challenges posed by nonmarket economies—are better achieved in coordination with like-minded allies, which provides a clear opening and opportunity for collaboration.  

The current moment is ripe for early US-EU engagement on achieving the United States’ policy objectives while minimizing collateral tariff damage (including to the US economy itself). Engagement could, indeed, drive the percentage numbers in the header above closer to zero, at least for the EU.

––L. Dan Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center.

That’s the amount of money generated by pulling forward future interest earnings on Russia’s blocked sovereign assets. For nearly three years, the G7 debated how to handle the $300 billion in Russian foreign exchange reserves being held in Western central banks. While some advocated for a total seizure of the full amount, others worried about the legality of such a move and the backlash it would create across the Global South. 

So the G7 reached a game-changing compromise. Creatively, and drawing in part on Atlantic Council GeoEconomics Center research (see our simple annuity formula below), the G7 calculated the interest these assets would earn over the next twenty years and deliver that total—$50 billion—to Ukraine in this calendar year. When you consider that Ukraine’s total budget in 2023 was around $80 billion, you understand that this solution is more than just a temporary fix—it’s a surge of resources delivered at a critical moment. And the number also represents what can happen when allies work together and think outside the box during an unprecedented situation.

––Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center.