Strauss-Kahn vows to revive IMF

FE Team | Published: September 30, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Edward Luce, FT Syndication Service
WASHINGTON DC: Dominique Strauss-Kahn, the French Socialist former finance minister, was on Friday appointed managing director of the International Monetary Fund (IMF) having promised to redouble efforts to revive the institution's fading relevance.
But the decision, which was a foregone conclusion in spite of Russia's sponsorship of a rival European candidate last month, underlined the continuing controversy over America and Europe's carve-up of the top jobs at the IMF and the World Bank.
In June, Robert Zoellick, the former US deputy secretary of state, was appointed president of the World Bank after the resignation of Paul Wolfowitz, the former US deputy secretary of defence.
Mr Strauss-Kahn, 64, once tipped as a possible French Socialist party presidential candidate, replaces Rodrigo de Rato, the former Spanish finance minister, who announced his resignation in June for personal reasons.
"[Dominique Strauss-Kahn] possesses the experience, vision and dedication to public service needed to successfully lead the IMF at this critical juncture," said Mr Rato, following Friday's appointment.
The decision by the 24-member IMF board was a formality after Hank Paulson, the US Treasury secretary, earlier endorsed Mr Strauss-Kahn's candidacy saying that he would "make the bold reforms necessary to lead a strong and relevant fund into the future".
Mr Strauss-Kahn has pledged to push through greater representation for developing countries in the IMF's complex shareholding structure, which is largely based on member countries' economic weighting in dollar prices. Many European countries, which together control 32 per cent of the shareholding, have resisted dilution of their weighting.
The IMF is also facing a growing financial shortfall because the larger developing countries, such as Brazil and the east Asian economies, have shunned the fund's credit lines in favour of the competitive spreads available on the international bond markets. In addition, widespread pre-payment of IMF loans has deprived the institution of much of its projected future cash-flow.
"The IMF is facing a crisis of legitimacy which Mr Strauss-Kahn's appointment will do little to address," said Jesse Griffiths, a policy officer at Action Aid, the non-governmental organisation.
Last month, Russia surprised many by endorsing the candidacy of Josef Tosovsky, a former prime minister of the Czech Republic, claiming Mr Strauss-Kahn lacked the qualifications necessary to restore the fund's legitimacy. However, Russia's move failed to enthuse the large developing countries.
But many are hoping that Mr Strauss-Kahn, who has a forceful political reputation, will have the ability to persuade smaller European countries to agree to governance reforms. The IMF share-holders meet this month for the fund's annual meeting.