International Monetary Fund

More stories

  • 125 Shares99 Views

    in Economy

    China’s Economy Is Slowing, a Worrying Sign for the World

    by

    Economic output climbed 4 percent in the last quarter of 2021, slowing from the previous quarter. Growth has faltered as home buyers and consumers become cautious.BEIJING — Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants.China’s economy slowed markedly in the final months of last year as government measures to limit real estate speculation hurt other sectors as well. Lockdowns and travel restrictions to contain the coronavirus also dented consumer spending. Stringent regulations on everything from internet businesses to after-school tutoring companies have set off a wave of layoffs.China’s National Bureau of Statistics said Monday that economic output from October through December was only 4 percent higher than during the same period a year earlier. That represented a further deceleration from the 4.9 percent growth in the third quarter, July through September.The world’s demand for consumer electronics, furniture and other home comforts during the pandemic has produced record-setting exports for China, preventing its growth from stalling. Over all of last year, China’s economic output was 8.1 percent higher than in 2020, the government said. But much of the growth was in the first half of last year.A port in Qingdao, in China’s eastern Shandong Province, earlier this month. China’s exports have remained strong.CHINATOPIX, via Associated PressThe snapshot of China’s economy, the main locomotive of global growth in the last few years, adds to expectations that the broader world economic outlook is beginning to dim. Making matters worse, the Omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains.The slowing economy poses a dilemma for China’s leaders. The measures they have imposed to address income inequality and rein in companies are part of a long-term plan to protect the economy and national security. But officials are wary of causing short-term economic instability, particularly in a year of unusual political importance.Next month, China hosts the Winter Olympics in Beijing, which will focus an international spotlight on the country’s performance. In the fall, Xi Jinping, China’s leader, is expected to claim a third five-year term at a Communist Party congress.Mr. Xi has sought to strike an optimistic note. “We have every confidence in the future of China’s economy,” he said in a speech on Monday to a virtual session of the World Economic Forum.But with growth in his country slowing, demand slackening and debt still at near-record levels, Mr. Xi could face some of the biggest economic challenges since Deng Xiaoping began lifting the country out of its Maoist straitjacket four decades ago.“I’m afraid that the operation and development of China’s economy in the next several years may be relatively difficult,” Li Daokui, a prominent economist and Chinese government adviser, said in a speech late last month. “Looking at the five years as a whole, it may be the most difficult period since our reform and opening up 40 years ago.”China also faces the problem of a rapidly aging population, which could create an even greater burden on China’s economy and its labor force. The National Bureau of Statistics said on Monday that China’s birthrate fell sharply last year and is now barely higher than the death rate. Private Sector StrugglesAs costs for many raw materials have risen and the pandemic has prompted some consumers to stay home, millions of private businesses have crumbled, most of them small and family owned.That is a big concern because private companies are the backbone of the Chinese economy, accounting for three-fifths of output and four-fifths of urban employment.Kang Shiqing invested much of his savings nearly three years ago to open a women’s clothing store in Nanping, a river town in Fujian Province in the southeast. But when the pandemic hit a year later, the number of customers dropped drastically and never recovered.As in many countries, there has been a broad shift in China toward online shopping, which can undercut stores by using less labor and operating from inexpensive warehouses. Mr. Kang was stuck paying high rent for his store despite the pandemic. He finally closed it in June.“We can hardly survive,” he said.Another persistent difficulty for small businesses in China is the high cost of borrowing, often at double-digit interest rates from private lenders.Chinese leaders are aware of the challenges private companies face. Premier Li Keqiang has promised further cuts in taxes and fees to help the country’s many struggling small businesses.On Monday, China’s central bank made a small move to reduce interest rates, which could help reduce slightly the interest costs of the country’s heavily indebted real estate developers. The central bank pushed down by about a tenth of a percentage point its interest rate benchmarks for one-week and one-year lending.Construction StallsThe building and fitting out of new homes has represented a quarter of China’s economy. Heavy lending and widespread speculation have helped the country erect the equivalent of 140 square feet of new housing for every urban resident in the past two decades.This autumn, the sector faltered. The government wants to limit speculation and deflate a bubble that had made new homes unaffordable for young families.China Evergrande Group is only the largest and most visible of a lengthening list of real estate developers in China that have run into severe financial difficulty lately. Kaisa Group, China Aoyuan Property Group and Fantasia are among other developers that have struggled to make payments as bond investors become more wary of lending money to China’s real estate sector.An idle construction site for a China Evergrande residential project in Taiyuan, in China’s northern Shanxi Province.Gilles Sabrié for The New York TimesAs real estate companies try to conserve cash, they are starting fewer construction projects. And that has been a big problem for the economy. The price of steel reinforcing bars for the concrete in apartment towers, for example, dropped by a quarter in October and November before stabilizing at a much lower level in December.Understand the Evergrande CrisisCard 1 of 6What is Evergrande? More

  • 138 Shares179 Views

    in Economy

    Critics Say I.M.F. Loan Fees Are Hurting Nations in Desperate Need

    by

    Democratic lawmakers say the global fund’s surcharges for emergency relief siphon away money that countries need to fight the pandemic.At a time when the coronavirus pandemic is fueling a rapid rise in inequality and debt, a growing number of policymakers and economists are pressuring the International Monetary Fund to eliminate extra fees it charges on loans to struggling nations because they siphon away scarce funds that could instead be used to battle Covid.The fund, which for decades has backstopped countries in financial distress, imposes these fees for loans that are unusually large or longstanding. They were designed to help protect against hefty losses from high-risk lending.But critics argue that the surcharges come at the worst possible moment, when countries are already in desperate need of funds to provide poverty aid and public health services. Some of the countries paying the fees, including Egypt, Ukraine and Armenia, have vaccinated only about a third of their populations. The result, the critics argue, is that the I.M.F. ends up undermining the financial welfare and stability of the very places it is trying to aid.In the latest critique, a letter this week to Treasury Secretary Janet L. Yellen from 18 Democrats in Congress, including Representatives Alexandria Ocasio-Cortez of New York and Pramila Jayapal of Washington, asked the United States to support ending the surcharge policy.The surcharge “discourages public health investment by developing countries,” the letter said. “This perverse outcome will undermine global economic recovery.” The letter echoed several other appeals from more than two dozen emerging nations, including Argentina, South Africa and Brazil, as well as economists.Volunteers at a soup kitchen in Buenos Aires last spring. The coronavirus pandemic has further strained Argentina’s poor.Sarah Pabst for The New York Times“Attempts to force excessive repayments are counterproductive because they lower the economy’s productive potential,” the Nobel Prize-winning economist Joseph E. Stiglitz and Kevin Gallagher, a professor of global development at Boston University, wrote in a recent analysis. “Both creditors and the country itself are worse off.”They added: “The I.M.F. should not be in the business of making a profit off of countries in dire straits.”The fund primarily serves as a lender of last resort, although recently it has expanded its mission to include reducing extreme inequality and combating climate change.In addition to building up a reserve, the surcharges were designed to encourage borrowers to repay on time. The poorest countries are exempt.The fees have become a major source of revenue for the I.M.F., which is funded primarily by its 190 member nations, with the United States paying the largest share. The fund estimates that by the end of this year, borrowers will have shelled out $4 billion in extra fees — on top of their regular interest payments — since the pandemic began in 2020.The debate over the surcharge is emblematic of larger contradictions at the heart of the I.M.F.’s structure and mission. The fund was created to provide a lifeline to troubled economies so that they recover “without resorting to measures destructive of national or international prosperity.”But the terms and conditions that accompany its loans have at times ratcheted up the economic pain. “They penalize countries at a time when they are in an adverse situation, forcing them to make greater cuts in order to repay debts,” according to an analysis from the liberal Center for Economic and Policy Research in Washington.“Demanding these surcharges during an ongoing recession caused by a pandemic goes even more against” the I.M.F.’s founding principles, the center argues.Voting power in the fund’s governance is based on the size of each country’s monetary contribution, with only the United States having veto power. That means that countries most in need have the least say in how the I.M.F. carries out its role.In a statement, the Treasury Department reiterated support for the surcharges: “As the I.M.F.’s major shareholder we have an obligation to protect the financial integrity of the I.M.F.” And it pointed out that the interest rates charged by the fund were often far below market rates.A review of the surcharges last month by the fund’s executive directors ended without any agreement to halt the charges. An I.M.F. statement explained that while “some directors were open to exploring temporary surcharge relief” to free up resources to deal with the pandemic, most others preferred a comprehensive review later on in the context of the fund’s “overall financial outlook.”Strapped countries that are subject to the surcharges like Argentina balked earlier at the extra payments, but their campaign has picked up momentum with the spread of Covid-19.“I think the pandemic makes a big difference,” said Martín Guzmán, Argentina’s minister of economy.He argues that the pandemic has turned what may have once been considered unusual circumstances into the commonplace, given the enormous debt that many countries have taken on to meet its rising costs. Government debt in emerging countries has hit its highest level in a half a century.The number of nations subject to surcharges increased to 21 last year from 15 in 2020, according to the I.M.F. Pakistan, Egypt, Ukraine, Georgia, Albania, Tunisia and Ecuador are among those paying.Argentina, which has long had a contentious and bitter relationship with the fund relating to a series of bailouts and defaults that date back decades, has been a leading opponent of the surcharges.The country is trying to work out a new repayment schedule for $45 billion that the previous government borrowed as part of a 2018 loan package. By the end of 2024, the government estimates, it will have run up a tab of more than $5 billion in surcharges alone. This year, 70 percent of Argentina’s nearly $1.6 billion bill from the I.M.F. is for surcharges.A protest against a possible new deal with the I.M.F. in Buenos Aires last month.Alejandro Pagni/Agence France-Presse — Getty Images“The charges will be undermining the mission of the I.M.F., which is to ensure global stability and balance of payments,” Mr. Guzmán said.According to World Bank estimates, 124 million people were pushed into poverty in 2020, with eight out of 10 of them in middle-income countries.Meanwhile, the costs of basic necessities like food, heating and electricity are surging, adding to political strains. This week, the I.M.F. warned in its blog that continuing Covid outbreaks, combined with rising inflation, debt and interest rates, mean emerging economies should “prepare for potential bouts of economic turbulence.” More

  • 113 Shares189 Views

    in Economy

    Inflation Batters Pakistan and Puts Pressure on Imran Khan

    by

    Rising prices and a weakened currency are straining households, intensifying pressure on Prime Minister Imran Khan to find solutions.Muhammad Nazir canceled his daughter’s wedding. He parks his motorcycle at home and walks to his shop. Many of his shelves are empty because he can’t afford to stock the same supply of candy, soft drinks and cookies that he once did.A growing number of his customers can’t buy his snacks anyway. The global inflation wave has dealt a severe blow to Pakistan, a country of 220 million people already struggling with erratic growth and heavy government debt.As the cost of food and fuel eats up a larger share of meager incomes, people are putting pressure on the government of Prime Minister Imran Khan to do something.“I am not making any profit these days,” Mr. Nazir, 66, said from his shop in Sohawa, a town about 50 miles southeast of Pakistan’s capital of Islamabad. “Still, I come here every day, open the shop and wait for customers.”Surging prices have imperiled President Biden’s agenda in the United States and hit shoppers from Germany to Mexico to South Africa. But they are having a particularly nasty effect in Pakistan, a developing country already prone to political instability and heavily dependent on imports like fuel. The effect has been worsened by a sharp weakening of Pakistan’s currency, the rupee, giving it less purchasing power internationally.Pakistan’s economy has been in and out of crisis since Prime Minister Imran Khan came to power in 2018.Didor Sadulloev/ReutersWhile inflation is expected to ease as supply-chain bottlenecks unsnarl, Pakistan feels it can’t wait. On Monday, the government announced that it had reached an agreement with the International Monetary Fund for the first $1 billion of what is expected to be a $6 billion rescue package.“The economy is the biggest threat that the government is in fact facing right now,” said Khurram Husain, a business journalist in Karachi. “This is basically eroding the very basis of their public support.”Protests organized by opposition parties have broken out across Pakistan in recent weeks, causing Mr. Khan’s political allies to examine their loyalties. The Pakistan Muslim League-Q, or P.M.L.-Q, party, which is in a coalition with Mr. Khan, said this month that it was becoming difficult to remain part of the government.“Our members of Parliament are feeling a lot of pressure in their constituencies,” said Moonis Elahi, Mr. Khan’s minister for water resources and a member of P.M.L.-Q. “Some even suggested leaving the alliance if the situation doesn’t improve.”Government officials have downplayed the recent surge in inflation, saying it is a global phenomenon. Mr. Khan has also blamed the foreign debt burden he inherited from the previous government.“The government spent the first year in stabilizing the economy, but when it was close to stabilizing it, the country faced the biggest crisis in 100 years: the coronavirus epidemic,” he said, adding, “No doubt the inflation is an issue.”Officials also cite price comparisons of fuel costs with neighboring countries, like India, claiming that Pakistan is still better off. Pakistanis have seen standard gas prices jump 34 percent in the last six months, to about 146 rupees a liter.Filling up the tank in Peshawar in early November. Pakistan imports a large portion of its oil, diesel and gasoline.Bilawal Arbab/EPA, via ShutterstockPakistan has been rushing to tamp down inflation and get the money it needs to keep buying abroad. Last week, Pakistan’s central bank sharply raised interest rates, a move that could help cool price increases but one that could crimp economic growth.Mr. Khan’s government reached out to Saudi Arabia for a lifeline. The Saudi crown prince, Mohammed bin Salman, pledged $4.2 billion in cash assistance. Members of his government are also chasing loans from China that they say are needed to complete crucial power-sector projects that are part of the $62 billion China-Pakistan Economic Corridor.Pakistan’s economy has been in and out of crisis since Mr. Khan, a former cricket star, came to power in 2018. But other periods of inflation were felt mainly by the rich, economists say. This bad turn is affecting everyone.Inflation surged 9.2 percent in October from the year before, according to government data. Food-price inflation is crushing Pakistan’s poorest residents, who already normally spend more than half of their incomes on food. The cost of basic food items shot up this month by 17 percent year over year, government data show. Pakistan’s biggest food import is palm oil, which has jumped in price.In the United States, food prices have risen 4.6 percent.In terms of energy, Pakistan imports about 80 percent of its oil and diesel and about 35 percent of its gasoline, according to Muzzammil Aslam, a spokesman for the finance ministry. The cost of electricity in Pakistan is already twice as much as in countries like India, China and Bangladesh.“The economy is not well,” Mian Nasser Hyatt Maggo, the president of the Federation of Pakistan Chambers of Commerce & Industry, a Karachi-based industry group, said simply.A charity worker served inexpensive dishes to laborers and others along a roadside in Karachi in June. The government subsidizes the cost of foods like grains, legumes and cooking oil.Asif Hassan/Agence France-Presse — Getty ImagesUnemployment has risen sharply, too, particularly among college graduates in cities. The number of people falling into poverty is up.Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More

  • 100 Shares99 Views

    in Economy

    World’s Growth Cools and the Rich-Poor Divide Widens

    by

    The International Monetary Fund says the persistence of the coronavirus and global supply chain crisis weighs on economies.As the world economy struggles to find its footing, the resurgence of the coronavirus and supply chain chokeholds threaten to hold back the global recovery’s momentum, a closely watched report warned on Tuesday.The overall growth rate will remain near 6 percent this year, a historically high level after a recession, but the expansion reflects a vast divergence in the fortunes of rich and poor countries, the International Monetary Fund said in its latest World Economic Outlook report.Worldwide poverty, hunger and unmanageable debt are all on the upswing. Employment has fallen, especially for women, reversing many of the gains they made in recent years.Uneven access to vaccines and health care is at the heart of the economic disparities. While booster shots are becoming available in some wealthier nations, a staggering 96 percent of people in low-income countries are still unvaccinated.“Recent developments have made it abundantly clear that we are all in this together and the pandemic is not over anywhere until it is over everywhere,” Gita Gopinath, the I.M.F.’s chief economist, wrote in the report.The outlook for the United States, Europe and other advanced economies has also darkened. Factories hobbled by pandemic-related restrictions and bottlenecks at key ports around the world have caused crippling supply shortages. A lack of workers in many industries is contributing to the clogs. The U.S. Labor Department reported Tuesday that a record 4.3 million workers quit their jobs in August — to take or seek new jobs, or to leave the work force.A street in São Paulo, Brazil, in July. Poverty in many nations is on the upswing.Mauricio Lima for The New York TimesIn the United States, weakening consumption and large declines in inventory caused the I.M.F. to pare back its growth projections to 6 percent from the 7 percent estimated in July. In Germany, manufacturing output has taken a hit because key commodities are hard to find. And lockdown measures over the summer have dampened growth in Japan.Fear of rising inflation — even if likely to be temporary — is growing. Prices are climbing for food, medicine and oil as well as for cars and trucks. Inflation worries could also limit governments’ ability to stimulate the economy if a slowdown worsens. As it is, the unusual infusion of public support in the United States and Europe is winding down.“Overall, risks to economic prospects have increased, and policy trade-offs have become more complex,” Ms. Gopinath said. The I.M.F. lowered its 2021 global growth forecast to 5.9 percent, down from the 6 percent projected in July. For 2022, the estimate is 4.9 percent.The key to understanding the global economy is that recoveries in different countries are out of sync, said Gregory Daco, chief U.S. economist at Oxford Economics. “Each and every economy is suffering or benefiting from its own idiosyncratic factors,” he said.For countries like China, Vietnam and South Korea, whose economies have large manufacturing sectors, “inflation hits them where it hurts the most,” Mr. Daco said, raising costs of raw materials that reverberate through the production process.The pandemic has underscored how economic success or failure in one country can ripple throughout the world. Floods in Shanxi, China’s mining region, and monsoons in India’s coal-producing states contribute to rising energy prices. A Covid outbreak in Ho Chi Minh City that shuts factories means shop owners in Hoboken won’t have shoes and sweaters to sell.South Africa has sent a train with vaccines into one of its poorest provinces to get doses to areas where health care facilities are stretched.Jerome Delay/Associated PressThe I.M.F. warned that if the coronavirus — or its variants — continued to hopscotch across the globe, it could reduce the world’s estimated output by $5.3 trillion over the next five years.The worldwide surge in energy prices threatens to impose more hardship as it hampers the recovery. This week, oil prices hit a seven-year high in the United States. With winter approaching, Europeans are worried that heating costs will soar when temperatures drop. In other spots, the shortages have cut even deeper, causing blackouts in some places that paralyzed transport, closed factories and threatened food supplies.In China, electricity is being rationed in many provinces and many companies are operating at less than half of their capacity, contributing to an already significant slowdown in growth. India’s coal reserves have dropped to dangerously low levels.And over the weekend, Lebanon’s six million residents were left without any power for more than 24 hours after fuel shortages shut down the nation’s power plants. The outage is just the latest in a series of disasters there. Its economic and financial crisis has been one of the world’s worst in 150 years.Oil producers in the Middle East and elsewhere are lately benefiting from the jump in prices. But many nations in the region and North Africa are still trying to resuscitate their pandemic-battered economies. According to newly updated reports from the World Bank, 13 of the 16 countries in that region will have lower standards of living this year than they did before the pandemic, in large part because of “underfinanced, imbalanced and ill-prepared health systems.”Other countries were so overburdened by debt even before the pandemic that governments were forced to limit spending on health care to repay foreign lenders.A power outage on Monday in Beirut. Lebanon’s economic and financial crisis has been one of the world’s worst in 150 years.Agence France-Presse — Getty ImagesIn Latin America and the Caribbean, there are fears of a second lost decade of growth like the one experienced after 2010. In South Africa, over one-third of the population is out of work.And in East Asia and the Pacific, a World Bank update warned that “Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century.” Businesses in Indonesia, Mongolia and the Philippines lost on average 40 percent or more of their typical monthly sales. Thailand and many Pacific island economies are expected to have less output in 2023 than they did before the pandemic.Overall, though, some developing economies are doing better than last year, partly because of the increase in the prices of commodities like oil and metals that they produce. Growth projections ticked up slightly to 6.4 percent in 2021 compared with 6.3 percent estimated in July.“The recovery has been incredibly uneven,” and that’s a problem for everyone, said Carl Tannenbaum, chief economist at Northern Trust. “Developing countries are essential to global economic function.”The outlook is clouded by uncertainty. Erratic policy decisions — like Congress’s delay in lifting the debt ceiling — can further set back the recovery, the I.M.F. warned.But the biggest risk is the emergence of a more infectious and deadlier coronavirus variant.Ms. Gopinath at the I.M.F. urged vaccine manufacturers to support the expansion of vaccine production in developing countries.Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world. In this latest report, it again called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus.“We’re witnessing what I call tragic reversals in development across many dimensions,” said David Malpass, the president of the World Bank. “Progress in reducing extreme poverty has been set back by years — for some, by a decade.”Ben Casselman More

  • 88 Shares149 Views

    in Economy

    I.M.F. Lowers Economic Growth Forecast for 2021

    by

    Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More

  • 150 Shares199 Views

    in Economy

    Debate Looms Over I.M.F.: Should It Do More Than Put Out Fires?

    by

    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 and the World Bank gather for their annual meetings in Washington next week.A pressing issue not in the official program is the controversy that has been swirling for weeks around the chief of the I.M.F., Kristalina Georgieva, threatening her leadership.An investigation last month accused Ms. Georgieva of rigging data to paint China as more business friendly in a 2018 report when she was chief executive at the World Bank. Ms. Georgieva has denied any wrongdoing.The scandal has focused on the bank’s credibility — billion-dollar decisions can be made on the basis of its information — as well as Ms. Georgieva’s culpability.But lurking behind the debate over her future are foundational questions about the shifting role of the I.M.F., 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 I.M.F. has more recently helped manage two of the biggest risks to the worldwide economy: the extreme inequality and climate change.Some stakeholders, though, have chafed at the scope of the fund’s ambitions, and how much it should venture onto the World Bank’s turf of long-term development and social projects. And they object to what’s perceived as a progressive tilt.“There is a modernizing streak here running through major financial institutions which is creating a kind of tension,” said Adam Tooze, a historian at Columbia University and the author of “Shutdown: How Covid Shook the World’s Economy.”Other pressures weigh on the agency as well. Washington is still home to the I.M.F.’s headquarters, and the United States is the only one of the 190 member countries with veto power, because it contributes more money than any other. But its dominance has been increasingly challenged by China — straining relations further tested by trade and other tensions — and emerging nations.The willingness of the Federal Reserve and other central banks to flush trillions of dollars into the global economy to limit downturns also means that other lenders, aside from the I.M.F., have enough surplus cash on hand to lend money to strapped nations. China has also greatly expanded its lending to foreign governments for infrastructure projects under its ambitious Belt and Road Initiative.At the same time, long-held beliefs like the single-minded focus on how much an economy grows, without regard to problems like inequality and environmental damage, are widely considered outdated. And the preferred cocktail for helping debt-ridden nations that was popular in the 1990s and early 2000s — austerity, privatization of government services and deregulation — has lost favor in many circles as punitive and often counterproductive.The debate about the role of the I.M.F. was bubbling before the appointment of Ms. Georgieva, who this month started the third year of her five-year term. But she has 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, calling for an end to all fossil fuel subsidies, for a tax on carbon and for significant investment in green technology.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 — Ms. 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 I.M.F. opposed the hard line taken by some Wall Street creditors in 2020 toward Argentina, emphasizing instead the need to protect “society’s most vulnerable” and to forgive debt that exceeds a country’s ability to repay.I.M.F. headquarters in Washington, where Republicans have bristled at Ms. Georgieva’s agenda.Daniel Slim/Agence France-Presse — Getty ImagesThis year, Ms. 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.Ms. Georgieva’s activist climate agenda has also run afoul of Republicans in Congress, who have opposed carbon pricing and pushed to withdraw from multinational efforts like the United Nations Framework Convention on Climate Change and the Paris climate agreement.So has her advocacy for a minimum global corporate tax like the one that more than 130 nations signed on Friday.In July, Laurence D. Fink, who runs BlackRock, the world’s largest investment management company, and was at odds with the I.M.F.’s stance on Argentina, called the fund and the World Bank outdated and said they needed “to rethink their roles.”The investigation into data rigging at the World Bank focused on what is known as the Doing Business Report, which contains an influential index of business-friendly countries. WilmerHale, the law firm that conducted the inquiry, said various top officials had exerted pressure to raise the rankings of China, Saudi Arabia, the United Arab Emirates or Azerbaijan in the 2018 and 2020 editions.The law firm reported that Ms. Georgieva was “directly involved” with efforts to improve China’s rating for the 2018 edition. She said WilmerHale’s report was inaccurate and rejected its accusations. The I.M.F. executive board is reviewing the findings.The United States, which is the fund’s largest shareholder, has declined to express support for her after the allegations. Ahead of a meeting of the I.M.F. board on Friday, Ms. Georgieva maintained strong support from many of the fund’s shareholders, including France, which had lobbied hard for her to get the job in 2019. Late Friday, the I.M.F. released a statement saying the board would “request more clarifying details with a view to very soon concluding its consideration of the matter.”In Congress, Republicans and Democrats called for the Treasury Department to undertake its own investigations. A letter from three Republicans said the WilmerHale inquiry “raises serious questions about Director Georgieva’s ability to lead the International Monetary Fund.”Several people sprang to her defense, including Shanta Devarajan, an economist who helped oversee the 2018 Doing Business Report and a key witness in the investigation. He wrote on Twitter that the law firm’s conclusions did not reflect his full statements, and that the notion that Ms. Georgieva had “put her thumb on the scale to benefit one nation is beyond credulity.”“It was her job to ensure the final report was accurate and credible — and that’s what she did,” Mr. Devarajan added.In an interview, he said critics had used the investigation to discredit Ms. Georgieva. The problem, he said, is “how people may have chosen to read the findings of the report and use that to criticize Kristalina’s credibility and leadership.”Mr. Devarajan was not the only one to make the case that the controversy was functioning in some ways as a proxy for the contest over the I.M.F.’s direction. Jeffrey Sachs, director of the Center for Sustainable Development at Columbia, wrote in The Financial Times that Ms. Georgieva was receiving “McCarthyite treatment” by “anti-China forces” in Congress.Whatever role one might prefer for the I.M.F. — traditional, expanded or something else entirely — the scandal is both a distraction and a threat.Nicholas Stern, a British economist who formerly served as the chief economist and senior vice president of the World Bank, said this controversy could not come at a worse moment.“The coming few years are of vital importance to the future stability of the world economy and environment,” he wrote in a letter to the I.M.F. board in support of Ms. Georgieva. “This is as decisive a period as we have seen since the Second World War.”Alan Rappeport More

  • 200 Shares149 Views

    in Economy

    Kristalina Georgieva’s tenure at the I.M.F. is in limbo as its board weighs allegations against her.

    by

    WASHINGTON — The tenure of Kristalina Georgieva as managing director of the International Monetary Fund faces a pivotal moment on Friday, when the fund’s executive board will meet to decide whether she should continue to be its leader after allegations that she pressured staff to manipulate a report to placate China when she was a top World Bank official.This week, the executive board spent hours questioning Ms. Georgieva about her actions. It also interviewed lawyers from WilmerHale, the firm that conducted the World Bank’s internal review of the circumstances surrounding the Doing Business survey. The review, published last month, concluded that Ms. Georgieva had played a central role in meddling with the report, raising questions about her judgment and ability to continue leading the I.M.F.Ms. Georgieva has denied the allegations, and in a meeting with the board on Wednesday she offered a forceful rebuttal.“The WilmerHale Report does not accurately characterize my actions with respect to Doing Business 2018, nor does it accurately portray my character or the way that I have conducted myself over a long professional career,” Ms. Georgieva said in a statement to the board, which was obtained by The New York Times.Mr. Georgieva, a Bulgarian economist who assumed the top I.M.F. job in 2019, also criticized the nature of the World Bank investigation and said she had been misled.“The email from WilmerHale requesting my participation said clearly that I was not a subject of the investigation and assured me that my testimony was confidential and protected by World Bank staff rules, which guarantee due process,” Ms. Georgieva said. “None of this proved to be true.”The controversy has raised questions about China’s influence in multilateral institutions. It has also become a distraction for the I.M.F. as it is trying to help coordinate the global economic response to the pandemic. Prominent economists have publicly debated whether Ms. Georgieva should step down. The Economist magazine called last month for her resignation.The United States, which is the fund’s largest shareholder, has yet to offer public support, and officials have declined to say if she should stay in the job.“There is a review currently underway with the I.M.F. board, and Treasury has pushed for a thorough and fair accounting of all the facts,” said Alexandra LaManna, a Treasury spokeswoman. “Our primary responsibility is to uphold the integrity of international financial institutions.”Former World Bank officials have described Ms. Georgieva as a polarizing figure, but she has generally won praise at the I.M.F. When she assumed the job, she quickly restructured the fund to give her more direct control over its daily operations. That included removing David Lipton, a longtime I.M.F. official and its first deputy managing director, before his term expired.Mr. Lipton is now a top adviser to Treasury Secretary Janet L. Yellen, who will have significant input as to whether Ms. Georgieva remains in the job.Treasury officials have been debating how to respond to the allegations against Ms. Georgieva. A person familiar with the deliberations said that Mr. Lipton has been among the officials who have been supportive of Ms. Georgieva, who he worked closely with while she was at the World Bank and he was at the I.M.F.Republicans and Democrats in Congress have expressed concern about Ms. Georgieva’s actions at the World Bank and called on Ms. Yellen to ensure “full accountability.”The United States traditionally selects an American to be president of the World Bank, while the managing director of the I.M.F. is usually from Europe.The I.M.F.’s executive board could make a decision about whether it continues to have confidence in Ms. Georgieva when it meets on Friday.The annual meetings of the World Bank Group and the International Monetary Fund take place next week. More