Trump’s Return Has Global Development Banks on Edge. With budget threats, geopolitical battles, and climate funding tensions, Washington is reshaping global finance. Who will survive the shake-up?

Donald Trump’s return to the White House is already rattling global financial institutions. True to his transactional approach, the president has signed an executive order calling for a review of U.S. participation in multilateral organizations. The World Bank, the African Development Bank (AfDB), and the Inter-American Development Bank (IDB) are bracing for possible funding cuts, a move that could shake up financing for emerging economies—especially in Africa, where annual funding needs exceed $400 billion, according to the AfDB.

Analysts fear that Trump’s administration could go even further by adopting recommendations from "Project 2025," a plan crafted by the conservative Heritage Foundation, which advocates for gradually pulling the U.S. out of multilateral institutions deemed too costly and not aligned with American interests.

The executive order, overseen by Secretary of State Marco Rubio and U.N. Ambassador Elise Stefanik, aims to assess the impact of U.S. contributions to international organizations and identify those no longer serving Washington’s interests.

While the approach may differ from that of USAID, analysts suggest that multilateral development banks (MDBs) could be in the hot seat. In late 2024, President Joe Biden had pledged a record $4 billion contribution over three years to the International Development Association (IDA), part of a new resource replenishment cycle for the World Bank’s poorest country program.

(From left to right) Akinwumi Adesina, president of the AfDB, and Ajay Banga, president of the World Bank.

A Survival Test for Development Banks

Is the World Bank in panic mode? Officially, no. But behind the scenes, its president, Ajay Banga, is working to convince Trump’s team that priorities like job creation, private investment, and infrastructure align with Washington’s goals.

But there is a catch: climate change. In 2023, multilateral development banks (MDBs) allocated $125 billion to climate-related projects—45% of their total commitments. At COP 29 in Baku, they pledged $170 billion, half of it for climate adaptation. But Trump, who prioritizes fossil fuel development and large-scale infrastructure, sees these numbers as excessive. His administration’s early executive orders, including withdrawing from the Paris Agreement, reinforce his stance.

Can these banks pivot to avoid funding cuts? It’s unclear. Climate finance has become a top priority in recent years. The AfDB, where the U.S. holds a 6.35% stake and 6.5% of voting rights—the largest among non-African shareholders—faces particular pressure. In 2024, it approved $10.77 billion in financing for African economies, with 55% allocated to climate-related projects.

Adding to the uncertainty, the AfDB will elect a new president in May, a process that always turns into a geopolitical contest. As the second-largest shareholder after Nigeria, the U.S. plays a decisive role in the outcome.

Market Jitters as Bond Investors Watch Closely

Financial markets are on high alert. Each year, MDBs raise tens of billions of dollars through bond markets, relying on investor confidence in U.S. backing. If Washington pulls back, borrowing costs could soar, making it more expensive for African nations to secure development funding at favorable terms.

A Bigger Battle: U.S. vs. China

Trump’s skepticism toward multilateral institutions is not new. During his first term, he tied a World Bank capital increase to reduced lending for China. This time, he could go even further—demanding more contracts for U.S. companies or even pushing for a complete overhaul of MDB priorities.

The numbers fueling his argument are striking: American companies secure just 2% of contracts financed by the World Bank, while Chinese firms take 29%. Republican hardliners see this as unacceptable and could use it as leverage to demand a shift in MDB policies. Their goal? Secure more business for American firms while curbing China’s influence.

Another sticking point is concessional loans to China, which have totaled $15 billion despite the country’s economic rise. Back in 2017, then-Treasury Secretary Steven Mnuchin slammed the idea of China receiving development aid, arguing that Beijing should be a net contributor, not a beneficiary. Since then, China has begun repaying its loans at twice the rate it borrows, but Trump’s allies are unlikely to let the issue drop.

Even if Trump stops short of reducing the U.S. stake in MDBs—since retaining influence in these institutions is seen as strategically important—concerns remain. Advocates of "Project 2025" could push for a major reassessment of U.S. participation, with a report due by August 3, 2025.

Some fear that if Washington pulls back, China could step in to expand its footprint in global development finance. Beijing already has its own institutions, including the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank.

Inside multilateral institutions, it’s all hands on deck. Diplomats and economists are scrambling to convince Washington that development banks play a crucial role in global stability. But with Trump prioritizing hard-nosed deal-making over traditional diplomacy, the future of multilateralism hangs in the balance.