IMF not fated to be led by European, says fund's head

The International Monetary Fund must not always be led by a European and could one day move its headquarters to Beijing from Washington, the French head of the international financial institution said on Friday.

“I don’t think it’s … fate that the IMF will be managed by a European,” Christine Lagarde, the Fund’s managing director, said at the London School of Economics.

“I think it’s a good thing that it’s managed by a woman for the first time,” she added, according to a webcast.

Since a deal at the time of the founding of the IMF and the World Bank in 1944, the Washington-based IMF has always been led by someone from Europe, while the World Bank is headed by an American.

Lagarde said the IMF is based in Washington because the United States gives the most money to the global lender, which depends on contributions from its 188 member countries.

“But the way things are going, I wouldn’t be surprised if one of these days the IMF was headquartered in Beijing, for instance,” she said.

Lagarde also sharply criticized the United States for holding up IMF reforms that would give greater say to emerging nations such as China and Brazil. The United States is the only major country to not ratify the changes due to opposition in Congress. And the reforms of the voting shares, known as quotas, cannot proceed without the United States, the only country to hold a controlling share of IMF votes.

“I think that the credibility of the institution, its relevance … is highly correlated with its good representation of the membership,” she said. “And we cannot have a good representation of the membership when China has a teeny-tiny share of quota and share of voice.”

However, she defended the IMF’s weighted voting system, which gives greater say to countries with bigger economies, saying it prevents the gridlock that can happen when every country gets an equal voice, as happened with talks at the World Trade Organization.

Source: Reuters