Divisions between the US and Europe over whether Kristalina Georgieva should remain in her post as the IMF chief are set to overshadow the fund’s flagship annual meetings this week as Washington wants her to go but European powers are more inclined to let her stay.
Georgieva’s position as the fund’s managing director has come under pressure since she was accused last month of manipulating data to favour China in a previous role at the World Bank. The 24 members of the IMF’s executive board are split into two camps, with the US and Japan, the fund’s two biggest shareholders, on one side, while France, Germany, Italy and the UK are more supportive, aligning with China and Russia on the issue, according to people briefed on the matter.
Despite a series of marathon meetings in recent days, the board has yet to reach a consensus. In a statement released late on Sunday following additional meetings with WilmerHale representatives and Georgieva, the IMF said the board made “further significant progress” in its assessment of the situation and would come to a decision “very soon”.
The fund’s annual meetings with the World Bank start on Monday.
A former division chief at the IMF said the extent of the board’s disagreements over Georgieva’s fate had already undermined her ability to lead going forward, leaving few alternatives beyond her being replaced.
“Such openly divided and at best modestly enthusiastic support for its managing director risks hobbling the institution’s effectiveness, both in terms of its policy advice and credibility of its analysis,” said the former IMF official. “Even if she weathers this storm, it will be difficult for Ms Georgieva to continue as an effective leader of the institution for much longer.”
Critics argue that the allegations against Georgieva jeopardise the ability of the World Bank and the IMF to promote pro-growth reforms and to speak truth to power in their dealings with governments.
But her backers stress her support for poorer nations during the coronavirus pandemic and her realignment of the fund’s priorities to address issues such as climate change and gender equality.
Georgieva is accused of manipulating data in China’s favour in the 2018 edition of the World Bank’s Doing Business annual report while she was the bank’s chief executive, a position she left for the IMF’s top job in October 2019. She has denied wrongdoing.
Simeon Djankov, a senior official at the bank under Georgieva, was also accused of overseeing the data changes and fomenting a “toxic” environment of threats and blackmail against staff. He did not respond to a request for comment.
The accusations were made in a report commissioned by the board of the World Bank from law firm WilmerHale, which the board made public on September 16.
Progressive economists have fought Georgieva’s corner. Jeffrey Sachs, director of the Center for Sustainable Development at Columbia University, wrote in the Financial Times that her removal “would be a dangerous and costly capitulation to anti-Beijing hysteria”.
Joseph Stiglitz, Nobel laureate and former chief economist at the World Bank, described efforts to remove her as a “coup” and the WilmerHale report as a “hatchet job”.
Six former World Bank officials, in a statement issued by a public relations agency retained by Georgieva last month, defended her as a “person of the utmost integrity and commitment to development”.
Her supporters also point to Georgieva’s record during the coronavirus crisis.
She has highlighted the unequal global response to the pandemic and channelled IMF emergency funding to 100 of the world’s poorest countries. She has also pushed through an allocation of $650bn of the IMF’s special drawing rights, a quasi-reserve asset that is the equivalent of newly minted money.
African governments and other states have given her vocal support in recent weeks.
But Georgieva’s critics say the focus should be on the allegations in the WilmerHale report and their implications for the credibility of both the World Bank and the IMF as providers of gold-standard economic data.
Anne Krueger, a former World Bank chief economist and deputy managing director of the IMF, said the affair left her “worried about the future in general”.
“I’m worried that if indeed this is somehow permitted to pass, we will have more pressure for more governments to change more numbers in more favourable directions,” she said. “Not everybody . . .[will] give in but there are some staff or management who will, and the situation will get out of hand if it isn’t already.”
Georgieva’s fiercest critics have questioned her denials that she pressured staff.
Paul Romer, a Nobel laureate who was World Bank chief economist under Georgieva and worked with her and Djankov, said the latter’s alleged actions “should be interpreted as being done with the knowledge and at the behest of Kristalina”.
Others worry that Georgieva’s fate will be decided not by her achievements or by concerns for the credibility of the world’s two leading multilateral institutions, but by geopolitics. They point to the rising tensions between Washington and Beijing, as well as France’s anger over Australia’s decision to scrap an agreement to buy French submarines in favour of a deal with the US and the UK to counter China.