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Growing worries about the future of the multilateral lenders will haunt this week’s annual meetings in Washington DC
The annual meetings of the International Monetary Fund and World Bank open on 11 October against a backdrop of political rows in both institutions. Those fights, touching on policy, personalities and geopolitics, are complicated by economic turmoil, fractured supply chains and ballooning debts around the world.
Both Kristalina Georgieva and David Malpass, the heads of the IMF and World Bank respectively, face accusations that they presided over the manipulation of data for the Bank's 'Doing Business' index. The index, often subject to government pressure (Morocco and Rwanda have hired lobbyists in Washington DC to bump up their ratings), operates as a ranking for pro-business policies (AC Vol 62 No 20, Fraternal links fraying).
The sanctity of data is upheld as an over-arching imperative in the Bank and the IMF. But disputes over the politicisation of data, such as governments trying to inflate growth rates, are not new. Many independent economists have regarded the Doing Business index as one of Bank's 'flakier data-sets'. It has now been suspended indefinitely.
The current row started when the World Bank's Ethics Committee, under Malpass's presidency, commissioned a law firm, WilmerHale, to investigate claims that the Doing Business data on China, Saudi Arabia and Azerbaijan, had been fixed in the 2018 and 2020 editions of the index.
Some of the politics start with the personalities. Before she was appointed Managing Director of the IMF, Georgieva was Chief Executive Officer at the World Bank under Jim Yong Kim, who had been appointed by President Barack Obama. When Jim Yong Kim resigned in February 2019, Georgieva became acting President of the World Bank before moving across to to the IMF in October 2019, where she was appointed Managing Director.
At the same time President Donald Trump nominated Malpass as President of the World Bank. A personal friend of Trump's, a senior official in his administration's Commerce Department, and a failed senatorial candidate on the Republican ticket, Malpass wants to reduce China's influence in multilateral organisations.
Since the institutions were established in 1944, the leader of the World Bank has been nominated by the United States; the chief of the IMF by European governments.
This carve-up ignores vast changes in international economic weightings over the last 70 years. It's under fresh strain as the leaders of both institutions face serious accusations.
Each has their supporters. Georgieva whom the law firm accuses along with ex-President Jim Kim of pressuring Bank staff to help maintain China's ranking, says its conclusion doesn't accurately characterise her actions. Joseph Stiglitz, a former chief economist at the World Bank, says the firm's report is a hatchet job.
Shanta Devarajan, a former Vice-President of the Bank's Africa Department and the official in charge of the Doing Business rankings in 2018, insisted Georgieva hadn't pressurised the team and complained the law firm ignored half of what he told them. Last week 16 African ministers backed Georgieva, praising her for the IMF's rapid response to the financial crisis triggered by the pandemic, as have several other ministers in Asia and Latin America (AC Vol 62 No 13, Stretching funds).
IMF directors spent much of 9 and 10 October trying to reach consensus on Georgieva's future. Much will depend on the US whose 17.4% stake gives it the biggest national vote.
At the same time more questions are being asked about Malpass's role on Doing Business. Bloomberg News reports that he had discussed ways to alter the ranking's methodology that would downgrade China's rating after it had risen to the 25th position from 31st in the latest assessment.
Staff working on the report said they feared retaliation from Bank management should it be discovered that they were the source of the reports. Other evidence for the reports has come from internal bank documents.
Malpass is also under fire for presiding over Saudi Arabia's 30 points improvement to the 62nd position in the Doing Business rankings in 2019. Malpass, who lavished praise on the 'reforming zeal' of the Saudi government, a close ally of the Trump administration, flew to Riyadh for an investment conference at a time when many international institutions were boycotting it.
A year earlier, Western intelligence agencies had concluded that Crown Prince Mohammed bin Salman was responsible for organising the murder of dissident Jamal Khashoggi in Saudi Arabia's consulate in Istanbul. Prior to that, some 400 business people and Saudi princes had been arbitrarily detained in Riyadh, some tortured and accused of corruption and disloyalty.
As the fight intensifies over the sanctity of data in the International Financial Institutions, it is likely to trigger calls for far greater accountability in both the Bank and Fund, and across the UN system, which is undergoing its own review process this year.
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