Should IMF do more than put out fires? The debate looms large
As the International Monetary Fund gets set for its annual meeting, economists ask if it’s time to update its mandate as the world’s financial crisis responder
Lopsided access to vaccinations, extreme economic inequality, rising food prices and staggering debt are on the agenda when the International Monetary Fund (IMF) and the World Bank gather for their annual meetings in Washington next week.
A pressing issue not in the official programme is the controversy that has been swirling for weeks around the chief of the IMF, Kristalina Georgieva, threatening her leadership.
An investigation last month accused Georgieva of rigging data to paint China as more business friendly in a 2018 report when she was chief executive at the World Bank. Georgieva has denied any wrongdoing.
But lurking behind the debate over her future are foundational questions about the shifting role of the IMF, which has helped guide the planet’s economic and financial system since the end of World War II.
Once narrowly viewed as a financial watchdog and a first responder to countries in financial crises, the IMF has more recently helped manage two of the biggest risks to the economy: the extreme inequality and climate change.
The debate about the role of the IMF was bubbling before the appointment of Georgieva, who this month started the third year of her five-year term. But she embraced an expanded role for the agency.
A Bulgarian economist and the first from an emerging economy to head the fund, she stepped up her predecessors’ attention to the widening inequality and made climate change a priority.
She has argued that however efficient and rational the market is, governments must step in to fix built-in flaws that could lead to environmental devastation and grossly inequitable opportunity. Sustainable debt replaced austerity as the catchword.
When the coronavirus pandemic brutally intensified the slate of problems — malnourishment, inadequate health care, rising poverty and an interconnected world vulnerable to environmental disaster — Georgieva urged action. Here was “a once in a lifetime opportunity,” she said, “to support a transformation in the economy,” one that is greener and fairer.
The IMF opposed the hard line taken by some Wall Street creditors in 2020 toward Argentina, emphasising instead the need to protect “society’s most vulnerable” and to forgive debt that exceeds a country’s ability to repay.
This year, Georgieva managed to create a special reserve fund of $650 billion to help struggling nations finance health care, buy vaccines and pay down debt during the pandemic.
That approach has not always sat well with conservatives in Washington and on Wall Street.
Former President Donald J Trump immediately objected to the new reserve funds — known as special drawing rights — when they were proposed in 2020, and congressional Republicans have continued the criticism. They argue that the funds mostly help American adversaries like China, Russia, Syria and Iran while doing little for poor nations.
Georgieva’s activist climate agenda has also run afoul of Republicans in Congress. So has her advocacy for a minimum global corporate tax like the one that more than 130 nations signed on Friday.