22 May 2011
Paola Subacchi

Dr Paola Subacchi

Senior Research Fellow, Global Economy and Finance


There is an urgent need to appoint a new managing director for the IMF, but there is also a vital need to get the appointment process right. The opportunity now exists to accelerate the effort to reform the governance of the IMF.

The job requires a balanced mix of technical expertise, diplomatic and personal skills, long-term vision for the institution and a strong sense of independence to fend off any political pressure. Merit rather than geography should inform the choice of the next managing director. This was the principle that the IMF agreed on in 2009 - 'adopt an open, merit-based and transparent process for the selection of IMF management' - and was reinforced by a pledge of the G20 last year. Adhering to merit would put an end to the informal understanding that a European should be at the helm of the IMF and an American at the World Bank. It also means that the next managing director should not necessarily be from a developing country either.

In practice, however, the voting system is skewed towards Europe and the US. European governments have already signalled their determination to choose a European for the top job with Christine Lagarde, France's finance minister, as the front runner. Because of a long-standing convention, Lagarde's name will need to be supported by the government of her own country. The US backing will also be needed in order to reach the majority of votes.

No doubt Christine Lagarde offers all the right requisites for the job. In terms of competences and experience, hers would surely be a merit-driven candidacy. Furthermore, having a competent woman at the top would help the gender balance, if not the governance, of the IMF.

But the claim, hastily advanced by some European governments, that the next managing director should come from Europe because of the ongoing sovereign crisis, risks turning the selection process into a confrontation between the defenders of the status quo and those who would like to see a significant change in governance, i.e. a non-European managing director.

There are many possible scenarios, but two in particular are worth discussing. The first contemplates non-European countries agreeing on a common candidate and receiving the backing of the US. Unfortunately, key developing countries outside of Europe have struggled to demonstrate a productive and cooperative attitude towards each other. The lack of substance coming out of April's BRICS Summit in Hainan reinforced that impression. The practice that candidates should be presented by their own country makes the group of emerging countries even more divided.

The second scenario sees Europe and the US ganging together in order to maintain the status quo. In this case, the selection would be de facto biased by the wish of allocating the job to Europe. In such a case, the selection process itself would undermine the credibility of the new managing director - and of the IMF itself - with many developing countries. This would set the clock back on governance prior to 2008.

The critical issue is how the US will decide to play. President Obama is unlikely to support Europe's claim just to please key governments there, especially after his remarks at the G20 summit in Pittsburgh in September 2009 on the need for a reassessment of the role of Europe vis-a-vis the governance of the IMF. The situation should become clearer in the next week or so. In the meantime a 'bridge candidate' who would be able to link different instances from different regional and national contexts should not be ruled out.