Doing Business scandal: Secretary Yellen turns down calls from IMF head Kristalina Georgieva

Treasury Secretary Janet Yellen has declined to return calls from the beleaguered head of the International Monetary Fund, 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 Treasury. The pair spoke regularly earlier this year, Yellen’s calendars indicate, as the U.S. and IMF worked on initiatives including the fund’s planned $650 billion global reserves injection.

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

U.S. 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.”

Signature Gatherings

The lack of communication comes in the run-up to the IMF and World Bank annual meetings, being held Oct. 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.

Georgieva has rejected allegations of meddling in the World Bank’s “Doing Business” ratings index for China. The report, which the World Bank discontinued by 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 Sept. 21, Georgieva said she was surprised by law firm WilmerHale’s conclusion in a Sept. 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.