In addition to creating an obvious conflict of interest, the European-dominated process of selecting the International Monetary Fund’s managing director has become a major obstacle to the institution’s mission. Though Europeans made the right choice this time, an overhaul is urgently needed.
OXFORD – Kristalina Georgieva’s reappointment as managing director of the International Monetary Fund is a welcome development, but it also highlights a major flaw in the IMF’s governance structure. In a world reeling from debt crises, violent conflict, climate change, and the lingering effects of the COVID-19 pandemic, the Fund’s importance is difficult to overstate. But to fulfill its proper role, it must be accountable to all member states, not just the powerful countries that currently wield disproportionate influence.
The reappointment process bears directly on this issue. On its website, the IMF informs readers that the Executive Board (where all countries are represented) may select a managing director by a majority of votes cast, though it has traditionally done so by consensus. In fact, a longstanding agreement between the Europeans and the Americans dictates that the former decides who will lead the IMF, while the latter chooses who will lead the World Bank. (The IMF has formally adopted “an open, merit-based, and transparent process” for selecting its managing directors, but this has served merely as a quality check on the Europeans’ pick.)
It should be obvious why this arrangement is a problem. The IMF needs all countries to believe that it is acting in an even-handed manner when it makes tough decisions about whom to help, and on what terms. And though it has formal rules, the most powerful countries regularly push hard for exceptions. The eurozone crisis underscored this conflict of interest. The IMF’s own subsequent evaluation criticized the “perfunctory manner” in which it followed its policies, and called out its decision to short-circuit the usual process by modifying its 2002 framework to grant European countries exceptional access.
OXFORD – Kristalina Georgieva’s reappointment as managing director of the International Monetary Fund is a welcome development, but it also highlights a major flaw in the IMF’s governance structure. In a world reeling from debt crises, violent conflict, climate change, and the lingering effects of the COVID-19 pandemic, the Fund’s importance is difficult to overstate. But to fulfill its proper role, it must be accountable to all member states, not just the powerful countries that currently wield disproportionate influence.
The reappointment process bears directly on this issue. On its website, the IMF informs readers that the Executive Board (where all countries are represented) may select a managing director by a majority of votes cast, though it has traditionally done so by consensus. In fact, a longstanding agreement between the Europeans and the Americans dictates that the former decides who will lead the IMF, while the latter chooses who will lead the World Bank. (The IMF has formally adopted “an open, merit-based, and transparent process” for selecting its managing directors, but this has served merely as a quality check on the Europeans’ pick.)
It should be obvious why this arrangement is a problem. The IMF needs all countries to believe that it is acting in an even-handed manner when it makes tough decisions about whom to help, and on what terms. And though it has formal rules, the most powerful countries regularly push hard for exceptions. The eurozone crisis underscored this conflict of interest. The IMF’s own subsequent evaluation criticized the “perfunctory manner” in which it followed its policies, and called out its decision to short-circuit the usual process by modifying its 2002 framework to grant European countries exceptional access.