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FINANCE: De Rato Steps Down from IMF Top Job

Emad Mekay

WASHINGTON, Jun 28 2007 (IPS) - Rodrigo de Rato, the managing director of the International Monetary Fund (IMF), says he will be quitting his job at the helm of one of the world’s economic powerhouses in October.

The announcement immediately renewed calls for reform of how the recruitment process for the job is done.

In a message to his staff Thursday, de Rato, 58, said he took the decision for personal reasons related to his children’s education.

“I have taken this decision for personal reasons. My family circumstances and responsibilities, particularly with regard to the education of my children, are the reason for relinquishing earlier than expected my responsibilities at the Fund,” de Rato said in his message.

De Rato, the ninth managing director of the IMF, will be stepping down in October after the annual meetings of the IMF and its sister institution, the World Bank, when bank governors and finance ministers from across the globe are due to gather here in Washington.

De Rato, who served as finance minister in the conservative government of former Spanish Prime Minister Jose Maria Aznar, came to the IMF in June 2004.


His tenure for the past two and half years has been lacklustre but he struggled to save the Fund’s stature from deteriorating as more and more countries walked away from its policies.

Under his leadership, the IMF faced a near exodus of borrowers trying to its escape its sway by paying up their debts early to have cleaner balance sheets.

The Fund was also criticised earlier this year for failing to consult with a broad audience in poor nations, including civil society and local partners.

But De Rato also helped formulate some of the answers to these complaints. As part of his Medium-Term Strategy, shareholders agreed in September to launch a two-year programme for a new quota formula plus at least a doubling of the number of basic votes. Increases in votes for China, South Korea, Mexico and Turkey have already been approved.

He also voiced support previously for reforming the very process that brought him to his Washington office.

Several development groups that monitor the Fund referred to his call as they renewed their demands for reform of how the next IMF managing director is chosen.

The process is governed by an archaic understanding between the two powers that control the Bank and the Fund, namely the United States and European nations, whereby the head of the World Bank is always a U.S. national while the IMF’s top job goes to a European.

“Rather than limiting the search to Europe, the governors of the IMF should open up the playing field and draw on the expertise of leaders in developing countries,” said Bernice Romero of the international advocacy group Oxfam International.

Several other European groups such as ActionAid, Christian Aid, the New Economics Foundation and the Bretton Woods Project voiced similar demands.

“European countries are now being given a second chance to lead the reform of international financial institutions,” said Peter Chowla of the London-based Bretton Woods Project.

But it is not clear how far such calls would go.

Similar appeals were voiced after the shamed World Bank President Paul Wolfowitz announced his intention to leave his post. But the United States refused to loosen its grip on the position. The new Bank president-designate, Robert Zoellick, a U.S. citizen, was nominated 17 days after Wolfowitz announced his departure.

Still democracy and aid campaigners say it is not too late to take up the issue again, especially with the Europeans, who have been less adamant in keeping their privilege at the Bank.

Last July, for example, the British Department for International Development issued a so-called white paper backing a merit-based system for the presidency of international institutions.

“They just missed a historic opportunity with the resignation of Paul Wolfowitz at the World Bank. But they can atone by ensuring that the next IMF managing director is selected through an open, transparent and inclusive process, where selection is based on merit not nationality, and where the views of all members have equal weight,” said Chowla.

They note that the delayed timing of de Rato’s departure means that there is ample time available for reviewing the process.

“With three months before de Rato’s departure, there is plenty of time to establish and implement a selection process that might be seen as appropriate to such a senior appointment at the national level,” the groups said in a statement.

In the past, several developing nations have sided with such calls from civil society groups and argued the selection process gives rich nations a monopoly on nominating and selecting the leaders of both he IMF and the World Bank, when most of their operations are in poor nations.

Such calls could also rest on recommendations made in April 2001 by a World Bank-IMF joint working group on how to choose the managing director that counseled opening up the process.

But although the two organisations’ executive boards adopted the recommendations as guidance for the future, they have not been implemented so far.

 
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