IMF chief in Chinese data scandal

Heather Scott



A storm of controversy threatens to undermine Kristalina Georgieva's leadership of the IMF as experts, US lawmakers and the Treasury scrutinise her actions in a former senior role at the World Bank.

The situation also could present a challenge to Democratic US president Joe Biden's administration, since it gives fodder to Republicans dubious of, if not outright hostile to, the multilateral institutions, especially their dealings with China.

An independent investigation released last week found that during her time as World Bank CEO, Georgieva was among the institution's leaders who pressured staff into changing data to paint China in a more favourable light in the 2017 edition of a closely-watched business favourability ranking.

Georgieva was appointed IMF managing director in 2019, and the lender's member countries will “have to make a decision about whether they're comfortable with, with her continuing in that role,” Nobel laureate Paul Romer said in an interview.

“I think they should think about their options.”



'NOT TRUE'

Georgieva disputed the probe's findings, and told IMF staff the charges were “not true.”

“Neither in this case nor before or after have I put pressure on staff to manipulate data. I would ask staff to please check, double-check, triple-check, but never change, never manipulate what the data tells us,” she said according to The New York Times, which obtained a transcript of her remarks.

She said she believes “strongly in the value of credible data and analysis that leads to policy recommendations for the benefit of our members.”

The United States will be crucial in determining Georgieva's fate, since Washington holds the biggest voting share in the International Monetary Fund, and the Treasury said it was analysing the report.

“These are serious findings,” the department said in a statement. “Our primary responsibility is to uphold the integrity of international financial institutions.”

The World Bank board commissioned the investigation by law firm WilmerHale, which examined tens of thousands of documents and interviewed more than three dozen current and former staff.

A spokesperson said the IMF board “is currently reviewing this matter,” without providing further details.



DOING BUSINESS REPORT

In light of the investigation, the World Bank scrapped the Doing Business rankings, which classified countries based on their business regulations and economic reforms, and has caused governments to jockey for a higher spot to attract investors.

The probe also found that Georgieva along with her associate Simeon Djankov, a former Bulgarian finance minister who created the report, and Jim Yong Kim, then-president of the bank, pressured staff to change the calculation of China's ranking to avoid angering Beijing.

The push came while bank leadership was engaged in sensitive negotiations with Beijing over increasing the bank's lending capital.

Justin Sandefur of the Centre for Global Development had written extensively about the problems with the methodology in the World Bank rankings, which he said “made it ripe for this sort of interference and manipulation.”

“For the head of the IMF to have been involved in data manipulation is a pretty damning allegation,” he told AFP. “That does seem like a real hit on their credibility.”

The flagship report ranks countries based on their business regulations and economic reforms, and has caused governments to jockey for a higher spot to attract investors.



RANKINGS

According to the investigation, Beijing complained about its ranking of 78th on the list in 2017, and the next year's report would have shown Beijing dropping even further.

The Washington-based development lender's staff was preparing the 2018 edition while leadership engaged in sensitive negotiations to increase its lending capital, which hinged on an agreement with China and the United States.

In the final weeks before the report was released at the end of October 2017, the World Bank's then-president Jim Kim and Georgieva, at the time the bank's CEO, asked staff to look into updating the methodology in regard to China, according to the investigation by law firm WilmerHale.

Kim discussed the rankings with senior Chinese officials who were dismayed by the country's ranking, and his aides raised the issue of how to improve it, according to the summary of the probe, released by the World Bank.

Amid the pressure from upper management, staff changed some of the input data, which boosted China's ranking in 2018 by seven places to 78 – the same as it was the previous year, according to the investigation that analysed 80 000 documents and interviewed more than three dozen current and former employees of the lender.

Georgieva chastised a World Bank senior official for “mishandling the bank's relationship with China and failing to appreciate the importance of the Doing Business report to the country,” the report said.

After the changes were made, she thanked him for “doing his part for multilateralism.”

Georgieva later visited the home of the manager in charge of the report to retrieve a copy, and thanked them for helping to “resolve the problem.”



'IMPROPER CHANGES'

Romer, a Nobel Prize winner who served as the World Bank's chief economist at the time, resigned in January 2018 after telling a reporter that the methodology for the ranking had been changed in a way that could give the impression political considerations affected the results.

At the time, the World Bank strenuously denied any political influence over the rankings.

The investigation also found “improper changes” in the 2020 report affecting the rankings of Saudi Arabia, United Arab Emirates and Azerbaijan.

Nadia Daar, head of Oxfam International's Washington DC Office, applauded the decision to scrap the report, saying the index “encouraged governments to adopt destructive policies that worsen inequality.”

– Nampa/AFP