New IMF head warns of world’s ability to handle global slump
Kristalina Georgieva, the incoming head of the IMF, has warned that the world’s ability to tackle a global economic slump “could soon be tested”, pledging that her top priorities would be to “minimise the risk of crisis” and “be ready to cope with downturns”.
The 66-year-old Bulgarian economist said that while the world and the Fund were better positioned to respond to a new slowdown in some respects — including the improvement of financial surveillance systems and global safety nets — other factors, such as the limited availability of monetary policy tools, would make it more difficult.
“It is harder than it was a decade ago to mobilise a swift collective response to the threats the world faces today,” Ms Georgieva said, in remarks to the IMF board ahead of a formal decision on Wednesday to appoint her to the role of managing director. “With warning signs now flashing, our preparedness could soon be tested.”
Ms Georgieva, who will take office on October 1 ahead of the IMF’s annual meetings later in the month, arrives at the IMF from the World Bank, where she was chief executive since 2017, and a previous seven-year stint at the European Commission. Ms Georgieva replaces Christine Lagarde, who stepped down after being chosen as president of European Central Bank.
Her tenure will begin as the IMF grapples with angst over the fate of a $57bn bailout of Argentina, the largest in its history, which threatens to be derailed by a populist candidates’ expected win in the country’s presidential election next month.
Ms Georgieva will also be facing other big challenges, including fallout from the US-China trade war on the global economy, possible repercussions of a no-deal Brexit for the European economy and the IMF’s attempt to keep itself sufficiently funded to rescue multiple stricken governments financially at one time, if needed.
“In a deteriorating economy it will be harder for everyone, but even more so for countries already facing difficulties — including some of the Fund’s programme countries,” she said. “The Fund needs to be sure that programmes remain relevant and that they reflect the full spectrum of changing circumstances”.
Many observers have pointed out that Ms Georgieva would likely take a similar approach to that of Ms Lagarde in managing the IMF, including extending the Fund’s focus on issues that were long seen as noncore to financial stability such as gender equality and climate change, factors now viewed as more relevant to macroeconomic health.
“We . . . trust she will be a strong voice in the fight against inequality and an advocate for climate action and gender equality,” said Nadia Daar, head of Oxfam’s Washington office. “These issues, which impact heavily on growth, stability and poverty, require strong political leadership from the IMF now, more than ever.”
Even at the Fund, Ms Georgieva said that she would seek “meaningful and measurable advancements in all aspects of diversity, with a particular focus on increasing the numbers and seniority of women and nationals from under-represented regions”.
Given her World Bank background and her personal experience from an emerging market economy in Europe, Ms Georgieva is expected to be particularly well-versed in tackling financial problems in developing economies.
She said she wanted to make sure that precautionary instruments, like credit lines, were “appropriately designed and deployable for a wide enough range of countries”, and said that the Fund needed to be more flexible in its “lending and capacity-building” programmes in low-income countries to account for specific needs and circumstances.