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Biden administration publicly keeps distance from IMF leader

Biden administration publicly keeps distance from IMF leader

Kristalina Georgieva allegedly acted improperly in helping compile the “Doing Business” report for the World Bank, which saw China’s ranking improve.

The Biden administration is publicly keeping its distance from the leader of the International Monetary Fund, Kristalina Georgieva, ahead of a key meeting Friday that could decide her fate.

Why it matters: The global economy is at risk from any new COVID-19 variant. The IMF is confronting a credibility crisis, and questions about whether China is exerting undue influence on multilateral institutions in Washington. As the fund's biggest shareholder, the U.S. has an important say in its future direction.

*  Georgieva was scheduled to join President Biden at his COVID-19 summit on the sidelines of the UN General Assembly last month — but never appeared with him.

*  So far, the administration has adopted a wait-and-see approach as key senators urge the president to "ensure full accountability."

Between the lines: Losing the head of the IMF would present another political headache for Biden and weaken an institution serving as an international firefighter for countries facing economic collapse.

*  “There is a review currently underway with the IMF Board and Treasury has pushed for a thorough and fair accounting of all the facts,” said Alexandra LaManna, a spokesperson at the Treasury Department.

*  “Our primary responsibility is to uphold the integrity of international financial institutions."

Driving the news: The world’s central bankers and finance ministers are scheduled to converge in Washington for the annual IMF and World Bank meetings, marking the first in-person gathering in two years.

*  Georgieva spent hours before the IMF executive board on Wednesday defending herself.

*  She faces allegations she acted improperly in helping to compile the annual “Doing Business” report for the World Bank, which saw China’s ranking improve.

*  “I am pleased that I finally had the opportunity to explain to the IMF Board my role in the Doing Business report and how I respected the integrity of the report,” Georgieva said in a statement.

*  “I look forward to an expeditious resolution of the matter in a way that preserves the core strengths of the IMF and the World Bank as strong multilateral institutions that fulfill their important missions during these times of unprecedented crisis.”

Flashback: The IMF lost its managing director, Dominique Strauss-Kahn, in 2011 following allegations he sexually assaulted a hotel maid.

*  He was replaced by Christine Lagarde, who left to lead the European Central Bank. Georgieva followed Lagarde at the IMF.

Go deeper: The World Bank commissioned WilmerHale, a global law firm, to conduct an internal review examining whether bank officials manipulated data in the annual “Doing Business” report.

*  The review examined the role played by Georgieva — at the time the World Bank’s CEO — in the context of China's improved ranking. That review, in turn, triggered a review by the IMF.

*  After the World Bank published the WilmerHale findings, The Economist called for Georgieva to resign.

*  On Thursday, Anne O. Krueger, a former chief economist at the World Bank and top IMF official, questioned Georgieva’s ability to run the fund.

*  “Should Georgieva remain in her position, she and her staff will surely be pressured to alter other countries’ data and rankings,” she wrote on Project Syndicate.

But, but, but: Georgieva, a Bulgarian economist, has her defenders, including Joseph Stiglitz, a former World Bank economist and Nobel laureate.

*  He's called the WilmerHale investigation “a hatchet job."

The intrigue: By tradition, European leaders get to decide who leads the IMF, while the U.S. gets to pick the head of the World Bank.

*  That arrangement has been challenged by emerging economies in Latin America, Asia and Africa.

*  Were Georgieva to be forced out, the delicate political balance over who leads what multilateral institution could be upset, and Europe’s leadership of the fund may no longer be a foregone conclusion.

*  It also would mean that the fund's current N0. 2, Geoffrey Okamoto, a former Republican congressional official installed by President Trump, would lead the fund.

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