The shareholders of the International Monetary Fund (IMF) have been forced to look for a new managing director earlier than they had been prepared for. It was an open secret that Dominique Strauss-Kahn, who has resigned this week following a sex scandal involving an accusation of rape, was planning to declare his candidature in the French presidential elections sometime this summer, perhaps by July. The IMF would then have had to look for a successor anyway. That process has had to begin sooner than expected with Mr Strauss-Kahn’s ignominious exit. Several names have been floated in the media, including that of deputy chairman of India’s planning commission Montek Singh Ahluwalia. That this media speculation is only half-informed is clear from the fact that both Mr Ahluwalia and Dr Stanley Fischer, governor of the Bank of Israel and former IMF deputy MD, are above the age limit of 65 that has thus far been adhered to in the selection process. This is not a binding constraint since the executive board of the IMF can relax the age restriction and specify any job criterion and selection process it deems fit. Indeed, in the run up to the selection of Mr Strauss-Kahn the Fund’s executive board laid down, for the first time, a selection criterion that specified professional qualifications of the candidate, moving away from the earlier practice of restricting the selection to a European. Under the IMF’s articles of agreement, the board is responsible for the selection of the MD and any executive director may propose a name, regardless of nationality.
Before selecting Mr Strauss-Kahn, the IMF board had defined the ‘successful candidate’ as one who would have a “distinguished record in economic policymaking at senior levels. He or she will have an outstanding professional background, will have demonstrated the managerial and diplomatic skills needed to lead a global institution.” Most names that have figured in the media, including that of Mr Ahluwalia (who headed the Fund’s independent evaluation office with distinction) would fit that bill. While German chancellor Angela Merkel has already claimed the post for a European, a Chinese official has called for “fairness, transparency and merit” in the selection process. More will be heard on these lines in days to come.
What the Fund desperately needs at this point in time is a restoration of credibility, greater policy clout around the world and more policy competence. The next MD has to be a person who can ensure these three Cs. The fact is that there is internal ideological confusion within the IMF on policy issues, with the collapse of the infamous ‘Washington Consensus’. This has hurt the Fund’s credibility and clout. Given that Greece is the Fund’s biggest borrower right now, Germany would want some leverage in the IMF, as Ms Merkel has confessed. Europe is also petrified of its declining global influence and may push hard to retain this one important international job. India need not worry about that. European leadership at the Fund has been kind to India. As a first step, India too should emphasise the need for transparency and merit, even if power politics will end up playing their due role. India has a stake in strong multilateral financial institutions. Whatever and whoever will enhance the three Cs should get India’s support.
