Bloomberg / Washington
Kristalina Georgieva risks seeing her authority as head of the International Monetary Fund undermined just weeks before an annual meeting of global finance chiefs, after being accused of influencing a report in China’s favour when she worked at the World Bank.
Georgieva on Thursday said that she “fundamentally” disagreed with the finding - by an outside law firm engaged by the World Bank - that she had applied pressure on the bank’s staff to boost China’s ranking in an economic report. She informed the IMF board of the allegations on Thursday.
The substance of the charge - putting “undue pressure” on World Bank staff to adjust the rating in the “Doing Business” report when she served as chief executive officer - was the latest in a series of scandals that have plagued the troubled report in recent years. So beleaguered, subjective and controversial is the methodology for the report, which measures the ease and transparency of operating in an economy, which the World Bank announced it will stop producing it.
But for Georgieva, 68, the scrutiny may only be starting.
The ranking that she is accused of pressuring staff to improve is that of China, a magnet for criticism in Washington over everything from trade to geopolitics. The US Treasury sees the accusations as serious and is “analysing the report,” the department said; the US holds veto power over major IMF and World Bank decisions. Republican lawmakers could use the issue to renew criticism of an expansion in IMF resources under Georgieva’s leadership.
Chinese Foreign Ministry spokesman Zhao Lijian said at a regular press briefing yesterday in Beijing that the World Bank should “follow internal procedures of review to investigate the issue to better protect the professionalism and authority of the Doing Business report and the reputation of the World Bank and its members.”
The government of the Asian nation “attaches high importance to improving the business environment and the achievement is witnessed by all,” he said.
US Representative French Hill, an Arkansas Republican and one of the most outspoken Congressional critics of last month’s IMF reserves issuance, said the report raises serious questions about Georgieva’s motivations during her time at the World Bank.
“If these allegations are true, then the IMF board should promptly assess her service in the top job there,” he said.
Hill, a member of the House committee on financial services, said that he would ask US Treasury Secretary Janet Yellen to assess the report and bring that opinion to Congress.
“Financial markets and policy makers rely on the expertise of the multilateral lenders and that reputation is now tarnished,” he said.
Justin Sandefur, a senior fellow and World Bank watcher at the Center for Global Development, a think-tank, said the report could end up affecting her relationship with IMF members.
“The IMF is in charge of ensuring the integrity of international macroeconomic statistics and holding countries to account for the integrity of their data,” Sandefur said in an interview. “This report just has Georgieva red-handed actively involved in the manipulation of data for geopolitical purposes. That seems pretty damning.”
The episode offers a rare window into how China has exerted influence on the leaders of international financial institutions in recent years, and how reactive those senior officials have been to sensibilities in Beijing.
The World Bank-commissioned report, penned by lawyers at WilmerHale, goes out of its way to exonerate China from having done anything wrong. “To be clear our review should not be read to imply that there was any inappropriate conduct on behalf of any Chinese or other government officials,” they wrote.
Georgieva was serving as the bank’s CEO under Jim Yong Kim, who was nominated by President Barack Obama and spent much of his tenure as president of the World Bank conducting geopolitics, often by necessity. He worked hard to build a relationship with both China and the rival to his own institution that it had established - the Asian Infrastructure Investment Bank.
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