IFI governance


Undemocratic gentleman’s agreement will further challenge next IMF managing director

9 April 2024

Artcover of the Observer Spring 2024, showing cartoons representing the IMF and World Bank shaking hands holding the EU and US flags respectively

In September, the term of the current IMF Managing Director (MD) Kristalina Georgieva will expire. On March 14th, the IMF board launched the formal process for appointing a new MD, with nominations open for three weeks and closing in early April, ahead of the IMF and World Bank Spring Meetings. While French Finance Minister Bruno Le Maire and Ireland’s Paschal Donohoe, who leads the Eurogroup of eurozone finance ministers, were both rumoured to have considered a run, no formal candidacies have been put forward so far.

The race seems pretty much tied up as European Union finance ministers already endorsed Kristalina Georgieva for a second term in early March. Civil society organisations rejected this move, which proves yet again that the “gentleman’s agreement”, an unwritten agreement that has ensured for 80 years that the IMF managing director has been a European and the World Bank president a US national, is alive and well (see Inside the Institutions, What is the ‘gentleman’s agreement’?). This means, in practice, that no other candidates – particularly from the Global South – are likely to emerge, as Georgieva seems on track to get backing of majority shareholders of the IMF, meaning the doors are already shut before the process even begins (see Inside the Institutions, IMF and World Bank decision-making and governance).

Global civil society and countries from the Global South have long called for an end to this illegitimate, neo-colonial agreement and for a more democratic appointment process. This should ensure the selection of the next managing director is undertaken in accordance with a merit-based, open and transparent process, underpinned by criteria involving a demonstrated commitment to international human rights, feminist principles, green and equitable development, as well as candidate engagement with civil society to outline IMF priorities and publicly available shareholder votes.

Amid these difficult economic conditions, and a particularly volatile global peace and security landscape, Georgieva as leader of the Fund will face increased pressure from states in the Global South to reform the global economic architecture to tackle a world mired in systemic crises.

Lack of governance reform will result in increased pressure for the IMF

Assuming she is re-appointed, Georgieva’s next term will likely be even more difficult than her first. Her first term was marked by numerous crises, from the unequal Covid-19 pandemic recovery and the economic and social spillovers from conflicts in Ukraine and Palestine, to the dramatic increase in capital costs and worsening debt crisis for low- and middle-income countries. These crises further exacerbated existing global challenges such as climate change, rising inequality, and the related increase in social and political instability as well as fragmentation of the multilateral order (see Observer Summer 2022).

Her efforts to tackle these overlapping systemic crises – including a historic Special Drawing Rights (SDRs) allocation in 2021, the launch of a new Resilience and Sustainability Facility (RST; see Observer Spring 2022), and securing critical financial support for countries like Ukraine and Argentina – were seen as key achievements. However, the Fund continues to be dictated to a large extent by geopolitical factors related to its unequal governance, with the MD often left to walk a fine line trying to manage increasingly contested shareholder interests. The allocation of SDRs (see Briefing, Reconceptualising Special Drawing Rights as a tool for development finance) was determined by US domestic politics rather than global needs and, due to the IMF’s anachronistic quota system, was unequally distributed based on the relative size of countries’ IMF shareholding. Similarly, while the RST provides concessional finance, in order to acces it, countries must have other loan programmes with the IMF and accept austerity policies (see Observer Winter 2022), combined with questionable green conditionality from the RST itself, limiting their fiscal and policy space to address their vulnerability to climate change in the first place (see Observer Spring 2024).

Amid these difficult economic conditions, and a particularly volatile global peace and security landscape, Georgieva as leader of the Fund will face increased pressure from states in the Global South to reform the global economic architecture to tackle a world mired in systemic crises. In the New Agenda for Peace, the UN Secretary General expressed concerns about the security implications of a fragmented geopolitical landscape. The internalisation of geopolitics in the international financial system through the continuation of the ‘gentleman’s agreement’ creates further tensions in the multilateral system. A product of this unspoken agreement, Georgieva will continue to be perceived as the instrument of western control of the Fund, particularly as the IMF has a history of applying different rules for countries friendly with western governments. More recently this was seen when shareholders supported a change in the Exceptional Access Policy to allow more funding to Ukraine, while conditioning Pakistan’s most recent IMF bailout on an arms deal with Ukraine. Regardless of her expertise and efforts, Georgieva’s new mandate does not represent the change needed but rather more of the status quo, affecting her ability to be an effective leader in tackling existing crises, thus contributing precisely to the dynamics outlined in the UN’s Agenda for Peace.

A new civil society letter sent to the IMF board on 26 March called on the next IMF managing director to prioritise policies and systems that are gender transformative, equitable, environmentally sustainable, and consistent with international human rights norms. The letter notes the MD’s objectives for the next mandate should include: A new SDR allocation to help meet urgent financing needs for developing countries in ways that do not create additional debt burdens and undue policy conditionality; promotion of progressive taxation; support for sustainable debt resolution instead of austerity conditionality; reform of the IMF’s quota formula to accurately reflect the changes in the global economy; and commitment to establish a human rights policy with ex ante and ex post impact assessment of all IMF’s policies and programmes.