World Bank economist becomes first IMF chief from emerging nation

by on September 25, 2019

Bulgarian economist Kristalina Georgieva was confirmed on Wednesday as managing director of the International Monetary Fund, becoming the first head of the global lender from an emerging market economy.

A centre-right politician who grew up in Bulgaria under communism, Ms Georgieva built a reputation in her time at the World Bank and European Commission as a straight-shooter, champion of gender equality and leader in the fight against climate change.

She has been on leave from her post as chief executive of the World Bank during the nomination process for the IMF, the world’s crisis lender that has assets of $1 trillion.

Ms Georgieva, 66, will face challenges including a global economic slowdown triggered by escalating trade tension between the US and China.

“Warning signs are flashing and we must be ready to be tested,” she said at the bank’s Washington headquarters after her confirmation.

The US, which represents the largest voting bloc on the IMF board, has withdrawn from multilateral accords and risks are growing in emerging markets such as Argentina, which last year received a $57 billion (Dh209.4bn) bailout, the IMF’s largest.

Ms Georgieva said her priority would be to help the bank’s 189 member countries minimise risks. The bank would be attentive to all members, big or small, she said.

Ms Georgieva, backed by French President Emmanuel Macron, last month won support from the rest of the EU and tacit backing from the US.

She will need to “work on rebuilding the institution’s legitimacy among emerging market economies”, said Prof Eswar Prasad of Cornell University, a former head of the bank’s China department.

The world’s “major advanced economies continue to view the key international financial institutions as their fiefdoms”, Prof Prasad said.

An IMF board source told Reuters before Wednesday’s confirmation that: “She has convinced the board that she is the leader that the institution needs and will be a strong advocate for the multilateral system.”

Ms Georgieva’s nomination was a cause for great pride in her home country.

“Only 20 years ago, Bulgaria was among the countries with an IMF rescue programme,” financial newspaper Kapital said this month.

“The nomination of the former Bulgarian EU Commissioner should be seen not only as her personal acknowledgement, but as a diplomatic success for the country.”

Ms Georgieva replaces Christine Lagarde, who in 2011 became the first woman to lead the IMF.

Ms Lagarde, 63, guided the lender through the European sovereign debt crisis, which began about a month after she took office. She will now lead the European Central Bank.

Before her appointment at the World Bank, Ms Georgieva held senior European Commission posts including budget commissioner.

She has deep knowledge of emerging market countries served by the World Bank.

Scott Morris, of the Centre for Global Development, said Ms Georgieva quickly made an impact after assuming the number two role at the World Bank in early 2017.

She pushed for consensus on a $13bn capital increase and reform package agreed to last year.

Under the reforms, lending to China and other wealthier developing countries will decrease with more resources going to needier countries.

“She was able to bring together a diverse group of shareholders. That’s her strength,” said Mr Morris, a former US Treasury official.

“What’s less clear is how she will handle the day-to-day business of the fund, the crisis moments. It’s harder to see how she will respond in a crisis.”

He said Ms Lagarde was successful in that she was not regarded as representing European interests, which helped her with the Greek debt crisis.

Ms Georgieva will have to take a similar multilateral approach, keeping her focus on the interests of the institution and individual countries.

“No one thought of Lagarde as a European chief executive,” Mr Morris said. “She rose above that.”

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