The IMF may have decided to keep Kristalina Georgieva as its managing director, for now. But that does not mean the controversy over whether she should lead the world’s lender of last resort is over.
Even as the flagship IMF annual meetings start in Washington, critics said Georgieva’s alleged manipulation of data to favour China while chief executive of the World Bank had stained one of the fund’s most prized assets: its credibility.
Moreover questions about her role — which play into the rift between the US and China, two of the fund’s biggest shareholders — may well intensify when a second, scheduled report into her conduct and her former World Bank peers is published this year.
Georgieva, who joined the World Bank as chief executive in 2017 before leaving for the IMF’s top job in October 2019, was accused last month of involvement in doctoring data in the bank’s annual Doing Business report. She has denied wrongdoing.
The IMF board, which met eight times to discuss the case, concluded late on Monday that its review of the accusations “did not conclusively demonstrate that the managing director played an improper role”. It also “[reaffirmed] its full confidence in the managing director’s leadership and ability to continue to effectively carry out her duties”.
Even so, people briefed on the board discussions said that conclusion had been a close one. The US initially led resistance to keeping Georgieva, but bowed to other large stakeholders including France, the UK, Germany and Italy.
On a call with Georgieva on Monday, US Treasury secretary Janet Yellen underscored that the decision to retain her came “absent further direct evidence” of her involvement in alleged efforts to manipulate data while at the World Bank. Yellen added her department would “closely” monitor and “evaluate any new facts or findings”.
The French economy ministry meanwhile said its judgment had been made “on the basis of the elements presented”. A person familiar with the UK position said the case against Georgieva was weak.
Throughout her tenure at the IMF, Georgieva has won plaudits for her efforts to help emerging economies weather the pandemic, spearheading the allocation of $650bn in special drawing rights, the equivalent of newly minted money.
Joseph Stiglitz, a Nobel economics laureate, said the alleged data changes were little more than a rounding error.
“What is not surprising is that it has brought out of the woodwork all the people responsible for the failed policies of the old IMF,” he said. “This is a political attempt to stop the IMF from moving in a direction that rejects the failed structural adjustment policies of the past toward new policy directions like climate change.”
Even so, a cloud still hangs over Georgieva’s fate. As the IMF acknowledged on Monday, investigations into alleged World Bank staff misconduct are “ongoing”. More importantly, critics said the affair had damaged the IMF’s credibility, irrespective of whether Georgieva had done right or wrong.
“The once wonderfully impressive culture of the IMF as an institution lies in tatters,” Erik Nielsen, group chief economist at UniCredit and a former World Bank and IMF economist, wrote to clients at the weekend.
Describing the IMF’s latest discussion of climate change as “misguided and rather disappointing” he couldn’t now “help wonder if politics may have played a role here as well”.
One senior IMF staffer said such inferences were incorrect but unsurprising, and thus indicative of the current mood.
“It feels like the stakeholders of the IMF did not take seriously their responsibility to preserve the credibility of the institution,” the staffer said. “It is not enough to clear the MD on insufficient evidence. In these matters the bar is a lot higher.”
Anne Krueger, a former World Bank chief economist and deputy managing director of the IMF, said she was worried that the controversy might affect IMF dealings with countries.
“I think we are going to see . . . less attention to what the fund says than what used to be the case,” she said, warning that some borrowers might be more “lax” in meeting the financial and economic targets of IMF lending programmes.
The allegations against Georgieva were contained in a report by law firm WilmerHale, commissioned by the World Bank’s board. It built on an internal World Bank investigation published in December 2020, which found that data had been manipulated in several Doing Business reports.
WilmerHale was hired to find out who had manipulated the data — and why. It also examined if there was any involvement by World Bank board members — Georgieva sat on the board as World Bank interim president for three months in 2019.
The second part of the WilmerHale report, expected to be finished in the next six to eight weeks, deals with potential wrongdoing by staff members and will report to the bank’s human resources department.
Paul Romer, a Nobel laureate and former World Bank chief economist under Georgieva, said: “She stuck to the Trumpian playbook — repeat the lie while partisans distract with whataboutism — and the IMF Board has now decided to follow along . . . Everything is political.”
Mark Sobel, US chair of the think-tank OMFIF and a four-decade senior US Treasury official, added that the saga left Georgieva a “compromised figure”.
“Airing the spat over her future so publicly has aggravated a bad situation, making it harder to resolve and uphold public trust,” he wrote on Tuesday. “This will tarnish more than her reputation.”