Opinion: A scorecard for Kristalina Georgieva’s IMF leadership

Kristalina Georgieva, the current managing director of the International Monetary Fund, has won the support of European countries for a second 5-year term. Yet does her performance in her first term justify the support? Georgieva’s reappointment is basically a done deal, as the European Union has a large voting share, and a decades-old, justly criticized “gentleman’s agreement” means the United States — another large shareholder — will back the EU’s candidate, in exchange for reciprocal support for their choice at the World Bank. The IMF’s mandate is to maintain the stability of the international financial and monetary system through lending, economic policy advice, and technical assistance. The past five years have seen a confluence of global crises, including conflict and growing geopolitical instability, the COVID-19 pandemic, and accelerating climate change. This, coupled with IMF responses to the crises, has had wide-reaching economic, social, and political impacts, particularly in lower-income countries. Here is an assessment of Georgieva’s leadership in four key areas so far, and suggested priorities for a second term at the helm of the IMF, based on Recourse’s research and advocacy work and graded out of a total of 20. Lending and emergency assistance. Score: 2/5 As the gatekeeper of the international financial system, the IMF responded quickly to support countries recovering from COVID-19. It provided emergency financial assistance and grants for debt relief. In January 2021, Georgieva urged governments to spend “as much as you can” to spur the recovery, signaling a move away from advocating austerity, a measure that the IMF has historically promoted in the wake of financial crises. Later that year, the IMF announced an allocation of $650 billion in Special Drawing Rights, or SDRs — the largest issuance of the IMF’s special reserve currency — to stabilize the global economy and support all countries, particularly the most vulnerable. The following year, the IMF established the Resilience and Sustainability Trust to support the disbursement of this new source of finance and address long-term structural challenges such as climate change and pandemic preparedness. This was a milestone in the IMF’s work. However, the inequitable governance structures of the IMF meant that SDRs were distributed according to each country’s IMF quota, which is determined by a nation’s wealth. This meant the largest share of the $650 billion was allocated to the richest countries, while African states received only 5% of the total, or roughly $33 billion. Meanwhile, having encouraged increased public spending in the wake of the pandemic, the IMF reverted to encouraging fiscal consolidation — decreased spending to reduce public deficits — at the start of this year. For lower-income countries facing much higher food and energy prices and record interest rates and debt levels, this is piling on unsustainable pressure. There are also major flaws in the design of the Resilience and Sustainability Trust, including the requirement for countries to have a program with the IMF to access it. The austerity conditions attached to IMF loans restrict countries’ autonomy and risk undermining people’s economic, social, and cultural rights. Climate ambition. Score: 2.5/5 Since Georgieva’s appointment in September 2019, she has publicly spoken out on multiple occasions regarding the need to act on climate, stating that the IMF sees progress on this issue as essential for global growth and economic stability and as core to its mandate. Under her leadership, the IMF accepted the need to mainstream climate into its work and formally adopted a Climate Change Strategy in 2021. This is welcome. Yet despite the IMF’s growing emphasis on climate, there is evidence that its policy advice to member countries continues to support a “business as usual” approach that is at odds with the rapid decarbonization urgently needed to meet global climate goals. Debt sustainability in IMF borrower countries like Uganda and Argentina relies on the acceleration of fossil fuel extraction and is failing to protect those most vulnerable to climate impacts in other large borrowers such as Pakistan. Overhauling the debt architecture. Score: 1/5 During the COVID-19 pandemic, the IMF responded with unprecedented speed as countries faced severe economic challenges. Between March 2020 and March 2022, the global lender provided 285 loans to 92 countries, totaling $171.7 billion. The IMF, together with the World Bank, also urged countries of the Group of 20 leading economies to set up a Debt Service Suspension Initiative, or DSSI, from May 2020 to December 2021, which suspended $12.9 billion in debt-service payments from the 48 participating countries to their creditors. But the current debt infrastructure and record-high interest rates are pushing countries into unprecedented levels of debt distress. The number of countries facing high levels of debt has increased sharply over the last decade, from only 22 in 2011 to 59 in 2022. IMF’s role in the debt infrastructure is crucial both as the lender of last resort and as the institution advising countries on managing their external debt. Almost 60% of the world’s lowest-income countries are in, or at high risk of, debt distress. Currently, half of developing countries devote more than 1.5% of their GDP and 6.9% of their government revenues to interest payments, a sharp increase over the last decade. Debt defaults have also become more frequent, with Chad and Zambia defaulting in 2020, then Ghana and Sri Lanka in 2022, and Ethiopia defaulting in 2023. IMF governance and quota reform. Score: 1.5/5 Georgieva has been an active supporter of an increased role for emerging markets and developing economies in decision-making at the IMF. In October 2023, sub-Saharan Africa was given a third seat on the IMF Board, which was welcome. However, there is still a long way to go to provide lower-income countries with more voice. For example, 45 African countries have less voting power than Germany alone. The governance structures are fundamentally unequal and undemocratic — as evidenced by the way the managing director is appointed, which Geogieva has done nothing to address. The Brazil G20 presidency will have a key role to play in encouraging more equitable representation, and the next big decision-making moment will be the 17th General Review of Quotas in 2025. Overall score: 7/20 Given this low performance score, what should the IMF’s focus be now? Assuming Georgieva is reappointed in September 2024, she will face a challenging context, with climate change, conflict, and geopolitical tensions affecting all nations. Her priorities should include: • Providing more and better support for member governments to invest in climate and development. • Taking a more proactive approach to solve the developing countries’ debt crisis. • Properly accounting for the long-term benefits of public investments in sustainable development pathways aligned with the green transition goals. • Modifying Special Drawing Rights allocation mechanisms and ensuring that the recycled SDRs reach the countries that need them most. • Taking a more consultative approach to avoid negative outcomes from its policy advice. These actions would help address urgent needs, redress decades of inequality, free countries from unsustainable debt traps, promote progressive and enlightened policymaking for people and nature, advance sustainable development goals, and leave a lasting positive legacy.