It's Europe vs BRICS

BRICS nations oppose convention that the IMF head has to be a European.

The race for the International Monetary Fund’s (IMF’s) top job is not turning out to be as straightforward as expected.

The post has fallen vacant due to resignation of Dominique Strauss-Kahn over sexual abuse charges.

While Europe — which has most voting powers — is backing French Finance Minister Christine Lagarde, the BRICS countries on Wednesday opposed the convention that the IMF chief has to be a European.

In Ethiopia, Prime Minister Manmohan Singh expressed disappointment over the developed world’s attempt to control IMF. “International relations, beyond a point, are power relations. Those who wield power don’t like to yield it easily,” he said.

The representatives of India (Arvind Virmani), Brazil, China, Russia and South Africa (BRICS) at IMF said, “Several international agreements have called for a truly transparent, merit-based and competitive process for selection of the managing director of IMF.”

“This requires abandoning the obsolete unwritten convention that requires that the head of IMF be necessarily from Europe. We are concerned over recent public statements by high-level European officials to the effect that the position should continue to be occupied by a European,” they said.

Britain has backed Lagarde. Finance Minister George Osborne said, “We support her as she’s the best person for the job. But I also personally think it will be a very good thing to see the first female managing director of IMF.”

Germany’s Finance Minister Wolfgang Schaeuble said Lagarde would give Europe its best chance to lead the fund again.

The BRICS representatives said these statements contradicted announcements at the time of selection of Strauss-Kahn in 2007, when Jean-Claude Junker, the Euro group president, said “the next managing director will certainly not be a European”. They quoted Junker as saying that “in the Euro group and among EU finance ministers, everyone is aware that Strauss-Kahn will probably be the last European to become the IMF director in the foreseeable future”.

However, the BRICS nations have not selected their candidate yet.

Finance ministry officials said if the candidature of Planning Commission Deputy Chairman Montek Singh Ahluwalia was ruled out because of a rule that the IMF chief’s age should be less than 65 at the time of joining, a person of international repute such as RBI Governor D Subbarao could be considered. However, there had not been any discussion on this, they said.

As Ahluwalia is 67, the finance ministry asked Virmani to find out if his candidature could still be considered, said officials. But Virmani told Business Standard, “As Ahluwalia is more than 65 years old, he is not eligible.”

The officials said they were waiting for the prime minister to come back from Africa this weekend to take a decision on the issue.

IMF was conceived at a United Nations conference in Bretton Woods, New Hampshire, United States, in July 1944. The 44 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the vicious circle of competitive devaluations that contributed to the Great Depression of the 1930s. Under a gentleman's agreement, a European runs IMF and an American the World Bank, its sister organisation.

The IMF head is elected by the 24-member executive board. So far, all selections have been through consensus. In 2007, the board said it would consider any candidate. However, only Josef Tosovsky, who was briefly the Czech Republic’s prime minister, was nominated. Professor of Economics with Jawaharlal Nehru University, Ravi Srivastav, said it would take another 5-10 years for someone from emerging countries to head IMF.

With contributions from Vrishti Beniwal & Saubhadra Chatterji