China’s favor claims could erode confidence in IMF chief

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A storm of controversy threatens to undermine Kristalina Georgieva’s leadership at the IMF as pundits, U.S. lawmakers and the Treasury scrutinize her actions in a former senior position at the World Bank.

The situation could also pose a challenge for the administration of US Democratic President Joe Biden, as it gives life to Republicans doubtful, if not downright hostile, to multilateral institutions, especially their relations with China.

An independent investigation released Thursday found that Georgieva, then CEO of the World Bank, was among the bank’s executives who pressured staff to change the data to portray China in a more favorable light in the 2017 edition of a closely watched corporate favor ranking.

IMF member countries “will have to decide whether they are comfortable with it, and it will continue to play that role,” Nobel laureate Paul Romer told AFP.

“I think they should think about their options.”

Romer was at the time chief economist for the World Bank and criticized Georgieva for devising a “laundering” of separate concerns he had raised about the institution’s flagship report, Doing Business.

He finally resigned in January 2018 after going public with his criticism.

– Meeting of the IMF Executive Board –

The United States will be crucial in determining Georgieva’s fate since Washington holds the largest voting stake in the International Monetary Fund, and the Treasury said Thursday it was analyzing the report.

“These are serious conclusions,” the department said in a statement. “Our primary responsibility is to maintain the integrity of international financial institutions.

Georgieva challenged the findings of the WilmerHale law firm investigation, which was commissioned by the board of directors of the World Bank and reviewed tens of thousands of documents and interviewed more than three dozen current employees and old.

She briefed the IMF board on the situation and denied the accusations. The body was scheduled to meet on Friday, although its agenda does not mention the report.

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Republican lawmakers have previously raised questions about Georgieva’s conduct.

Arkansas representative French Hill called the report “alarming” and said “the reputation of multilateral lenders is now tarnished”.

If the allegations are true, “the IMF’s board should quickly assess his service in the most senior position there,” Hill said in a statement.

The situation was another example of “how the Chinese Communist Party systematically works to hijack multilateral institutions,” he said.

– “Quite damning allegation” –

In light of the survey, the World Bank removed the Doing Business ranking, which ranked countries based on their trade regulations and economic reforms, and pushed governments to fight for a higher place to attract investors.

The investigation also revealed that Georgieva and his partner Simeon Djankov, a former Bulgarian finance minister who created the report, and Jim Yong Kim, then chairman of the bank, pressured staff to change the calculation. China’s ranking in order to avoid angering Beijing.

The push came as the bank’s management was engaged in sensitive negotiations with Beijing over the bank’s loan capital.

The IMF has its own series of reports on national economies, which could be called into question following the allegations against Georgieva.

Justin Sandefur of the Center for Global Development had written extensively on the methodological issues of the Doing Business ranking, which “made it ripe for this kind of interference and manipulation.”

After the latest revelations, “it doesn’t look great” for Georgieva, he told AFP.

“For the head of the IMF, being involved in data manipulation is a pretty damning allegation,” he said. “It seems to be a real blow to their credibility.”

Hill called on Treasury Secretary Janet Yellen to report to Congress on the situation and find ways to “ensure strict and transparent data integrity in World Bank and IMF reports and assessments.”

Likewise, Kentucky Republican lawmaker Andy Barr has asked the Treasury to investigate the “results of the bomb,” saying “Georgieva’s involvement in manipulating data for the benefit of China is alarming.”

He said Georgieva’s leadership at the IMF questioned other relations with Beijing and “has implications for China’s influence in the Fund. Ensuring integrity at the IMF is essential.”

Georgieva attended an IMF roundtable on Friday without commenting on the controversy, and is due to attend the United Nations General Assembly next week.

It is also expected at the annual meetings of the IMF and the World Bank in early October.

hs / cs

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