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16th Aug 2022

EU helps Georgieva keep IMF job, US backs down

  • IMF chief Kristalina Georgieva has been accused of manipulating country data to favour China in a previous role as number two at the World Bank (Photo: European Commission)
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The International Monetary Fund (IMF) has voiced full confidence in its chief, Kristalina Georgieva, a Bulgarian former EU commissioner, following a row on China.

It spoke out late on Monday (11 October) after several days of internal discussions, which pitted the US, who wanted her to go, and EU states, who wanted her to stay.

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"This has obviously been a difficult episode for me personally," she said, according to Reuters.

"However, I want to express my unyielding support for the independence and integrity of institutions such as the World Bank and IMF; and my respect for all those committed to protecting the values on which these organisations are founded," she added.

Georgieva had been accused by law firm WilmerHale of manipulating country data to favour China in her pre-IMF role as number two at the World Bank (WB).

According to the law firm, Georgieva together with WB president Jim Yong Kim manipulated the World Bank Doing Business index to prevent China dropping to the 85th spot in 2018 (down from 78 the previous year).

Georgieva denies the allegations.

Senior World Bank staff who were directly involved also insisted she was innocent.

But it remains to be seen to what extent they will remain in the air during the week-long annual IMF-WB summit.

The IMF's executive board debated the matter over the weekend with Georgieva and attorneys from the WilmerHale law firm.

Washington had wanted her head to roll, supported by Japan, but European powers preferred her to stay, aligning with Russia and China.

The Eurozone represents 22 percent of the funds budget - compared with the US Treasury's 17 percent and 6 percent for China - and according to the economist Chris Marsch ex-IMF, "Europe is where the power is."

US treasury secretary Janet Yellen also said on Monday that: "absent further direct evidence with regard to the role of the managing director there is not a basis for a change in IMF leadership".

But Yellen added that the Georgieva probe had revealed "serious issues" and that she would keep a closer eye on the IMF in future.

Georgieva, a Bulgarian economist who is also a former EU commissioner, has steered the fund to play a more active role in addressing climate change and humanitarian issues.

She successfully advocated for a $650bn issuance of recovery money (or special drawing rights - so-called SDR's) for low- and middle-income countries' recovery, which has lead to broad support for her policies in those countries.

"Ousting Georgieva would be more than merely a personnel decision. It would be hard not to see it as a victory for the conservative wing of international finance," financial historian Adam Tooze said this weekend.

"Georgieva's alleged favouritism towards China will be red meat for the likes of Ted Cruz [a Republican senator in Texas]", he added.

According to Tooze the fight over Georgieva can be seen in light of Washington's apprehension over China's economic rise, and America's efforts to weaken China's position in the institution.

France's finance minister Bruno le Maire, who in 2019 led the selection process that ended in Georgieva's victory, is also meeting together with EU finance ministers in Washington this week.

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