• Saturday, July 13, 2024
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IMF launches selection process for managing director


The International Monetary Fund officially launched the selection process for its leader Wednesday, though few see a serious challenge to current managing director Christine Lagarde, who has said she is open to another five-year term.

The expiration of Ms. Lagarde’s current term in July had long been seen as a potential opportunity for emerging markets to challenge the seven-decade history of a European leading the emergency lender.

But Ms. Lagarde’s popularity among many of the fund’s most powerful members—including emerging markets—and her signal last October that she is open to serving a second term is driving many fund watchers to call the selection all but over.

Manuel Valls, French Prime Minister, who as a socialist comes from a different political party from Ms. Lagarde, said Finance Minister Michel Sapin would make a statement on the issue on Friday. But he told a small group of journalists: “The French authorities support Christine Lagarde.”

“Based on an exceptional record that she has built up and the trust she has earned amongst all constituent members from all part of the world, I really don’t think she’ll be challenged in any serious way,” said Amar Bhattacharya, a senior fellow at the Brookings Institution, a think tank in Washington.

Mr. Bhattacharya, a former director of the Group of 24, a bloc of developing countries formed to represent the interests of emerging-market economies, said Ms. Lagarde’s perceived support for a second term would likely damp potential interest from other contenders for the post. “She is already very well established.”

U.K. finance minister George Osborne early Thursday nominated Ms. Lagarde for a second term.

“Christine has the vision, energy and acumen to help steer the global economy through the years ahead,” Mr. Osborne said.

Douglas Rediker, a fellow at the Peterson Institute for International Economics and former U.S. representative to the IMF’s executive board, said the former French finance minister’s approach to the job gives her a strong chance of being reconfirmed.

“She has been viewed as an independent voice at the helm of the fund, taking positions that have generally been seen as a very serious attempt to gain consensus broadly among the fund’s membership, not just major countries,” he said.

The IMF said the board aims to complete the selection process by early March.

A long-running legal case in France could be one potential snag for Ms. Lagarde. A French judicial commission has ordered the IMF chief to stand trial for alleged negligence over a decision she made as finance minister. Recent developments may have slightly elevated the risks the case potentially represents to her bid since she was appointed in 2011, though the issue didn’t hinder her bid back then.

Ms. Lagarde over the past five years has sought to pull emerging markets closer to the IMF’s fold, seeing their enfranchisement at the institution as critical to ensuring the fund’s influence on their policies.

She has also set out to repair the IMF’s image among emerging markets by trying to restore credibility lost in the Greek debt crisis. Under the former managing director, Dominque Strauss-Kahn, the IMF had been seen as a junior partner to its powerful European members in the biggest bailout of the institution’s 71-year history. The Greek program fostered a perception that the fund’s European and U.S. leadership gave its Western members preferential treatment.

But less than a year into her tenure, Ms. Lagarde backed a plan to restructure Greece’s debt in the largest sovereign debt relief in history. She also used her bully pulpit at the world’s top economic adviser to push Europe into recapitalizing its banking sector. The advice initially drew sharp criticisms from her old colleagues—including from Christian Noyer, then France’s central bank governor—but authorities ultimately recognized the necessity of bolstering the financial system and heeded the counsel.

“For us to be credible, I had to make sure that we were even handed and that we were not protecting or giving special treatment,” Ms. Lagarde said in an interview late last year.

Ms. Lagarde has also taken pains to champion the interests of its larger emerging-market members. Late last year, she helped get China’s yuan included in the IMF’s elite basket of reserve currencies.

The IMF chief also challenged the U.S. Federal Reserve over its exit from an era of easy-money policies, warning the central bank against acting prematurely, a move she said could harm emerging markets.