Money & Banking

IMF elects Bulgaria’s Kristalina Georgieva as new chief

Bloomberg Washington | Updated on September 26, 2019 Published on September 26, 2019

Bulgarian economist Kristalina Georgieva. File Photo   -  Reuters

First leader from an emerging market to hold the position

Bulgarian economist Kristalina Georgieva secured the top job at the International Monetary Fund (IMF), continuing the tradition of a European holding the role while also becoming the first leader from an emerging market.

The former World Bank chief executive starts her five-year term as managing director October 1, according to a statement released after the funds executive board voted on Wednesday. She succeeds Christine Lagarde, a former French finance minister who led the fund from 2011 and is the incoming European Central Bank president.

Georgieva said in brief remarks before reporters and staff at the IMF’s headquarters in Washington that her immediate priority is to help the funds 189 member nations minimise the risk of crises and cope with potential downturns.

Challenges ahead

Warning signs are flashing, and we must be ready to be tested, she said. I assume my position fully aware of the challenges we face. Global economic growth continues to disappoint, trade tensions persist, and debt burdens are rising in many countries.

Georgieva, 66, is the first person from an emerging market economy to lead the IMF since its inception in 1944, the fund’s statement said. Georgieva immediately confronts the economic crisis in Argentina, which last year negotiated the biggest loan in IMF history at $56 billion in return for fiscal reforms.

The fund is assessing Argentina’s new debt plan and considering whether to release the funds next loan tranche. President Mauricio Macri plans to renegotiate debts, including with the IMF, among other measures. Lagarde told Bloomberg Television on Tuesday that the fund did the best we could at the time in a very difficult situation.

Read more: ‘Global recession unlikely, but trade war is a key risk’

Georgieva also faces faltering global growth and concern of recessions in Germany and Italy as the US-China trade war weighs on businesses and financial markets. The uncertainty from Brexit is also adding to the worrying outlook for the world, which the IMF projects will grow by 3.2 per cent this year, the weakest pace since the financial crisis. The fund will release new projections next month at its annual meeting in Washington.

The IMF is also under pressure from the US, its biggest shareholder, to take a tougher line on China over the management of its currency. The Trump administration in August formally designated China a currency manipulator after the yuan slipped through the symbolic seven-to-the-dollar level in response to the announcement of new US tariffs.

Georgieva, a former EU commissioner, has championed anti-poverty initiatives throughout her career. With the IMF under increasing pressure to soften its austerity demands on struggling borrowers, she may provide a more sympathetic ear. She was the only candidate put forward by the European Union.

Human dimension

Ashoka Mody, a former deputy director in the IMF’s Research and European Departments, said Georgieva’s impact may be limited as she isn’t seen as an economic heavyweight who commands respect from global policy makers like Lagarde and other predecessors. However, her background may help her add a human dimension to policy advice for nations recovering from economic crises, Mody said.

“If she’s able to use this opportunity to overcome that handicap by making the IMF a voice against unbridled financial interests and for a more just global economy, then she would have done herself a favour, and the institution too, Mody said.

Under an informal pact between the US and Europe, the IMF chief has always been a European while the World Bank has been led by an American. Some observers have called for the sister institutions to depart from tradition and appoint an outsider to the roles in recognition of the growing clout of emerging markets such as China and India, and the lenders focus on development.

Georgieva’s appointment would, however, break 40 years of dominance by Europe’s more affluent west. Before Lagarde, there was Dominique Strauss-Kahn, also from France, Spain’s Rodrigo de Rato and Germany’s Host Koehler.

Emerging market countries correctly say this is the first managing director from an emerging market, IMF First Deputy Managing Director David Lipton, who assumed the chief’s role on an acting basis, said in a Bloomberg Radio interview on Wednesday. Her experience across emerging and developed economies in her work in Europe and at the World Bank, I think, gives her a huge reservoir of support from our membership.

The IMF had to scrap its under-65 age limit to get Georgieva approved. The change brought the fund in line with the World Bank, which has no age restriction for leaders.

Published on September 26, 2019
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