US Withdrawal Could Threaten World Bank Rating: Moody’s

Moody's has issued a cautionary warning that the triple-A ratings of the World Bank and other multilateral lenders could be at risk if the United States withdraws its support following a review ordered by President Donald Trump regarding US participation in international intergovernmental organizations.

In a recent Executive Order, President Trump directed a comprehensive evaluation of US government support for all international organizations of which the United States is a member, citing concerns over the United Nations' departure from its foundational mission of promoting global peace and security. The order focuses on specific agencies, including the UN Human Rights Council (UNHRC), UNESCO, and the UN Relief and Works Agency for Palestine Refugees (UNRWA). The review of US support for development banks is expected to take approximately six months. Although the governance frameworks of these institutions typically allow for an orderly withdrawal by shareholders, such a move would have wide-reaching consequences.

Moody's underscored the United States' critical role as a primary shareholder in several rated Multilateral Development Banks (MDBs), warning that any significant reduction in US support would adversely impact their creditworthiness. The United States holds the largest share in the World Bank Group, with a 16.4% stake in the International Bank for Reconstruction and Development (IBRD) and a 19% share in the International Development Association (IDA), reported US News. Additionally, the United States has a 30% stake in the Inter-American Development Bank, 15.6% in the Asian Development Bank, and 10% in the European Bank for Reconstruction and Development.

Regarding the IBRD, the United States has committed about US$3.7 billion in paid-in capital and holds callable capital commitments totaling US$49.2 billion, with loans and guarantees amounting to approximately US$263 billion. While the average maturity of IBRD loans is 8.4 years, some loans extend up to 50 years, considering that the United States would remain financially responsible for the IBRD's loan portfolio for many years to come.

Moody’s experts warned that a potential US withdrawal from these institutions could create an opportunity for other countries, notably China, to expand their influence. "Among these shareholders is China, which has long sought a larger share in the IBRD, a goal that has consistently been opposed by successive US administrations," Moody's concluded.