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What’s data-rigging scandal about; and why IMF board allowed Kristalina Georgieva to stay

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Kristalina Georgieva was accused of manipulating World Bank’s Ease of Doing Business rankings during her term as chief executive in favour of China.

What’s data-rigging scandal about; and why IMF board allowed Kristalina Georgieva to stay
The International Monetary Fund (IMF) has backed its Managing Director Kristalina Georgieva amid accusations that she influenced a World Bank report in favour of China.
The decision to allow her to continue in her role came after the executive board probed allegations against Georgieva that she had pressurised staff to change the World Bank’s Ease of Doing Business (EoDB) rankings during her term as chief executive.
“Having looked at all the evidence presented, the executive board reaffirms its full confidence in the managing director’s leadership and ability to continue to effectively carry out her duties,” the IMF said.
What are the allegations?
Georgieva, a Bulgarian economist, was the chief executive of the World Bank from 2017 to January 2019, when she became the interim president after the resignation of Jim Yong Kim. In October 2019, Georgieva joined the IMF as managing director.
In January 2018, Paul Romer, the then chief economist of the World Bank, first raised doubts over the World Bank’s EoDB rankings and told The Wall Street Journal that they were rigged for political reasons.
The World Bank suspended the rankings in August 2020 after finding some data irregularities between October 2017 and 2019 that were inconsistent with the Doing Business methodology. It was reported that the data was tweaked to enhance the rankings of China (in EoDB 2018) and Saudi Arabia, UAE and Azerbaijan (EoDB 2020).
The World Bank engaged law firm WilmerHale in January 2021 to conduct an independent review of the accusations. In September, WilmerHale published a report saying Georgieva was directly involved in fudging data to improve China’s ranking in the Doing Business Report.
How China’s position improved
In the 2018 report, China was first ranked 85, which was later changed to 78, according to the WilmerHale assessment. The previous year too China had ranked 78.
The law firm, however, did not find any data manipulation to improve rankings of Saudi Arabia, UAE and Azerbaijan.
Georgieva denied the allegations and said, “I disagree fundamentally with the findings and interpretations (of the WilmerHale report).”
IMF decision
Having considered the information, the IMF executive board said the WilmerHale report “did not conclusively demonstrate that the managing director played an improper role” in influencing the Doing Business 2018 Report.
US Treasury Secretary Janet Yellen also reaffirmed that “absent further direct evidence with regard to the role of the managing director, there is not a basis for a change in IMF leadership.”
As of now, the board has held eight meetings to reach a decision, highlighting the need for judicious handling of the situation.
Last month, the World Bank had said it would discontinue the Doing Business report as the WilmerHale assessment and other internal audit reports “raised ethical matters, including the conduct of former board officials as well as current and/or former Bank staff.”
Why EoDB index is crucial?
Through the EoDB ranking, the World Bank assesses how friendly a country is to do business in. The annual report, which started in 2002, assesses 190 economies on various parameters such as how long it takes to start a business in that country, what is the cost of a construction permit, and the number of procedures required to enforce a contract.
International investors use the rankings to identify the risks and opportunities in countries. It grew in significance on the back of rising interest of developing countries like India, South Africa, Brazil, Indonesia, and China in seeking more foreign direct investment. Political leaders also used the rankings to either claim success or berate the existing government.
Not the first time
This is not the first time that the head of the World Bank or IMF has been mired in controversy. Former managing director of IMF Dominique-Strauss Kahn resigned in 2011 following his arrest on allegations of sexual assault. Former IMF managing director Rodrigo Rato was sentenced to jail in Spain over a credit card scandal in 2017. IMD chief Christine Lagarde was found guilty of negligence in using of public funds.
Jim Yong Kim, former president of World Bank till 2019, has also been questioned on his role in the rankings controversy.
 
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