The Guardian

Another IMF chief has survived a personal storm: but the fund’s reputation will suffer again

- Larry Elliott

In the past couple of decades, managing directors of the Internatio­nal Monetary Fund have fallen into two categories: those who have had personal difficulti­es and survived and those who have had personal difficulti­es and stepped down.

Kristalina Georgieva, the current IMF boss, is one of the former. The question of whether she instructed a report to be doctored to put China in a more flattering light when she was vice-president of the World Bank has turned into a saga involving whistleblo­wers, an external report, lengthy grillings by the IMF board and accusation­s of a dirty tricks operation mounted by conservati­ve forces in Washington.

As a former European Commission vice-president, Georgieva knows how to look after herself. She has received the backing of the IMF board and comfortabl­y batted away questions about her conduct when quizzed by journalist­s at the IMF’s annual meeting.

She will expect memories to be as short as they were when her predecesso­r Christine Lagarde was hauled through the French courts five years ago. In all likelihood, she will be proved right.

That said, it is a bit of a pyrrhic victory for Georgieva and the institutio­n she leads. Public trust in the IMF will be diminished. Reputation­al damage will be permanent, even if it is modest.

The row has forced the bank to suspend publicatio­n of its Doing Business report, which is no great loss given its bias in favour of deregulati­on, making social protection less generous and removing minimum wage protection for workers.

It has also prompted calls for an end to the “gentleman’s agreement” whereby the US chooses the president of the World Bank while a European gets to run the IMF.

This arrangemen­t, which has existed since the two organisati­ons were created at the end of the second world war, is an anachronis­m and anything that hastens its end is welcome. Had the selection process been open and based strictly on merit, neither Georgieva nor David Malpass, the president of the World Bank, would be doing their current jobs.

Rate rise chances fall

Recent City speculatio­n that the Bank of England may raise interest rates before the year’s end looks wildly premature in the light of the recent performanc­e of the economy.

The picture is clear. Activity rebounded fast in the spring as lockdown restrictio­ns eased but the pace of recovery has since slowed. In August, according to the Office for National Statistics, output rose by a modest 0.4%, while the previously reported 0.1% rise in July was revised down to a 0.1% fall. Put in context, that was the first monthly drop in gross domestic product since the start of the pandemic, outside a lockdown period. The “pingdemic”, which forced about 1 million people to stay at home, was largely to blame.

When it last produced forecasts for the economy two months ago, the Bank said it was expecting growth of 2.1% in the third quarter of this year, but it would now take an increase in national output of 2.2% in September for that to happen. That looks out of the question, given the bottleneck­s in the supply chain that affected the economy last month and the damage caused to consumer and business confidence from rising energy prices. Trade, with imports rising in the latest three months while exports have been falling, will be a drag on growth.

As the gridlock at Felixstowe shows, a lack of HGV drivers will continue to have an impact in the fourth quarter – a period when the economy will have to do without the support provided by the government’s furlough scheme and higher universal credit payments.

In short, the GDP numbers act as a useful corrective to unemployme­nt figures released earlier this week showing record job vacancies and payrolls back to pre-crisis levels. Andrew Bailey, the Bank’s governor, talked recently of the “hard yards” to come for the economy. The Bank needs to ensure it doesn’t make them even harder.

Georgieva will expect memories to be as short as they were when Lagarde was hauled through the French courts five years ago

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 ?? ?? Georgieva has comfortabl­y batted away questions about her conduct
Georgieva has comfortabl­y batted away questions about her conduct

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