Singapore's Tharman would be worthy successor to Lagarde at IMF

Singapore's finance minister has the right skills while it's time for a non-European to take charge

PUBLISHED : Tuesday, 22 April, 2014, 10:33am
UPDATED : Wednesday, 23 April, 2014, 5:20pm

Christine Lagarde is more than halfway through her tenure as managing director of the International Monetary Fund. She is the 11th consecutive European in the job.

There is no shortage of talent to succeed her in July 2016. This time, ample notice is required to prepare an open and transparent selection process. There must be no European monopoly on the post.

I would like Tharman Shanmugaratnam, Singapore's finance minister, to be a candidate. He is thoughtful, technically competent and well respected - and he would hit the ground running. The IMF needs a managing director with equal doses of technocratic and political skills.

When Dominique Strauss-Kahn, the overly high-flying previous incumbent, departed in May 2011 because of extracurricular activities, a feeble attempt was made to open up the appointment to a global contest, but the outcome was a foregone conclusion.

The US needs some stiff talking to. This is where people like Tharman can play a role

A Frenchwoman followed a Frenchman. For 38 of the 68 years in which the IMF has had a managing director, a French person has been at the helm.

In the previous round, the Official Monetary and Financial Institutions Forum, an independent think tank, backed as a candidate Zeti Akhtar Aziz, the highly accomplished governor of Bank Negara Malaysia, but she showed no inclination to join the contest.

Tharman is an IMF insider, having been the chairman of the International Monetary and Financial Committee since 2011. He is Singapore's deputy prime minister and a previous chief executive of the Monetary Authority of Singapore. He is also a member of the Group of Thirty, a global consultative group on international economic and monetary affairs. You cannot get a better résumé than that for the job.

In the past, when asked about the possibility that he might go for the position, Tharman has shrugged his shoulders or murmured something self-deprecating. But if the possibility came into view, the Singapore government would no doubt take it very seriously.

The IMF has just had its spring meeting in Washington. The world economy is in better shape than when Lagarde took over. Its analysis of the world's experiments with austerity has been criticised, as has been its forecasting record. But it has often got its macroeconomics wrong. Yet it faces challenges, as does the global economy.

The United States Congress is holding up long-overdue reforms, including quota rebalancing agreed by the rest of the world. The refusal to vote funds for reforms is entirely due to quarrels between President Barack Obama and Congress. Any movement is unlikely before November's mid-term elections.

The US needs some stiff talking to. This is where people like Tharman can play a role. Someone has to tell the US that its days of hegemony are over in the global financial field, just as they are in the political arena.

The IMF affords Lagarde a pulpit to tell the world how irresponsible the Americans are, in the hope of inspiring some activity in Washington. Thus far she has held her fire.

Lagarde's relative hesitancy may reflect a desire to keep on the right side of an important ally of France. France and the US are having an unusual honeymoon since the British failed to march into Syria. It may be she does not want the opprobrium of disrupting the mood music. Perhaps, at a time of her choice, she will act decisively. Equally likely, time for IMF reforms may run out.

In any case, the IMF and its friends must begin thinking about the succession. The reasons the managing directorship should no longer go automatically to a European are even more obvious than three years ago.

The emerging economies have traversed the recession in better shape than the developed countries. They had better financial regulation. But they have been subjected to asymmetric shocks due to quantitative easing from the industrialised countries. First quantitative easing and now tapering have convulsed the emerging-market economies.

The IMF has not been as alive to the problems of the majority of its members as it should have been. It continues to be a US-Europe club.

Let's hope that, as the horse trading starts on Lagarde's successor, there will be other candidates from around the world. The important thing is to begin the global discussion on how the IMF can be better run - and who should run it. This discussion should start now.

Meghnad Desai, emeritus professor of economics at the London School of Economics and Political Science, is chairman of the OMFIF advisory board and a member of Britain's House of Lords