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US Treasury Secretary Janet Yellen (left) has reportedly declined to take calls from International Monetary Fund chief Kristalina Georgieva (right). Photo: AFP

US Treasury’s Yellen declines to take IMF chief’s calls over alleged manipulation of China’s business-climate rating

  • Since the scandal broke earlier this month, International Monetary Fund chief Kristalina Georgieva has called Janet Yellen but failed to get through
  • A report commissioned by the World Bank alleged that Georgieva pressured bank staff while working there to boost China’s business-climate rating

US Treasury Secretary Janet Yellen has declined to return calls from the beleaguered head of the International Monetary Fund (IMF), Kristalina Georgieva, since a scandal broke, indicating that the Biden administration’s withholding of support for her goes beyond its public statements.

Since Georgieva was accused earlier this month of improperly intervening in a World Bank report in her prior job there, she has made attempts to speak with Yellen but has failed to get through, people familiar with the matter said, speaking on the condition of anonymity.
The report from law firm WilmerHale, commissioned by the World Bank, alleged that Georgieva – who took the helm of the IMF in 2019 – pressured bank staff to boost China’s business-climate rating.

Georgieva previously had easy access to Yellen, the people said, given the close nature of multilateral engagement between the IMF and the US Treasury. The pair spoke regularly earlier this year, Yellen’s calendars indicate, as the US and IMF worked on initiatives including the fund’s planned US$650 billion global reserves injection.

The credibility of the IMF is clearly being damaged
Timothy Ash

The US is the largest shareholder in both the IMF and World Bank, and the Treasury Department manages those relationships.

US Treasury spokeswoman Alexandra LaManna declined to comment on Yellen’s recent contact with Georgieva. An IMF spokesperson also declined to comment, as did a spokesperson for Georgieva.

“The credibility of the IMF is clearly being damaged,” said Timothy Ash, a strategist at BlueBay Asset Management in London and a veteran analyst of emerging markets. He said Georgieva should step aside until the investigations are complete.

A Treasury official said the department has reviewed the allegations of improper conduct and finds them to be concerning and serious. The department is awaiting the IMF’s own assessment, the person said, speaking on the condition of anonymity.

The IMF ethics committee is currently reviewing the findings of the World Bank-commissioned report.

“As we have made clear, Treasury believes the report’s findings are serious and have warranted a full review by the IMF of the managing director’s role in the Doing Business Report,” Treasury’s LaManna said, reiterating a statement made earlier this month. “Our primary responsibility is to uphold the integrity of international financial institutions.”

The lack of communication comes in the run-up to the IMF and World Bank annual meetings, being held October 11-17. Those are signature gatherings for the two Washington-based institutions, and bring together finance ministers and central bank chiefs from around the world.

Members of both parties are voicing concerns about Georgieva. While several Republican lawmakers called for Treasury to probe the allegations, two prominent Democrats – House Financial Services Committee Chair Maxine Waters and Senate Foreign Relations Committee Chair Robert Menendez – have also called the allegations troubling.

“Given how critical it is that this data be and be seen as unimpeachable, these allegations are deeply disturbing,” Menendez, a New Jersey Democrat, and ranking member Jim Risch of Idaho said in a September 22 letter seen by Bloomberg on Monday.

“The impact these allegations could have on the strength and reputation of our international financial institutions and the Bretton Woods system are still unknown – but surely they will not be good.”

Last week, Waters, a California Democrat, said the WilmerHale review’s findings were “very troubling,” that the situation undermined the World Bank’s reputation and that it called the IMF’s leadership into question.

Georgieva has rejected allegations of meddling in the World Bank’s “Doing Business” ratings index for China. The report, which the World Bank discontinued after ethics issues were found with its preparation, was used by investors – and often touted by governments – as a gauge of competitiveness.

In a three-page letter to the head of the IMF board’s ethics committee dated September 21, Georgieva said she was surprised by law firm WilmerHale’s conclusion in a September 15 report that she played a “key role” in changes related to China’s ranking in the 2018 report.

“This is simply untrue,” Georgieva wrote. 

Georgieva has received support from other quarters, including from former World Bank chief economist and Nobel laureate Joe Stiglitz. 

The IMF has pledged a “thorough, objective, and timely review” of the allegations against Georgieva. Last week, after the WilmerHale audit was released, Georgieva said she disagreed with the findings and told fund staff at a town hall that she asked staff to double-check or triple-check data, but never change its ultimate message.