The IMF confirmed Bulgarian economist Kristalina Georgieva as the fund’s next Managing Director on Wednesday.
The former World Bank chief executive takes the reins for a five-year term on 1 October, becoming the first person from an emerging economy to lead the institution.
In a statement following the announcement, Georgieva said her immediate priority was to help countries minimise the risk of shocks and be ready to cope with downturns at a time when global growth disappoints, trade tensions persist, and debt is at historically high levels.
“We should not lose sight of our long-term objective – to support sound monetary, fiscal and structural policies to build stronger economies and improve people’s lives. This means also dealing with issues like inequalities, climate risks and rapid technological change,” she added.
What it means for Africa
Georgieva replaces Christine Lagarde at a time when the US-China trade war is stirring uncertainty not only in key trading partners of the world’s two largest economies, but in emerging markets in Africa and beyond.
As global growth slows, the risks to Africa’s economies are growing. This could slow inflows of Chinese investment into the continent, and cause leaders to once again look to the IMF as lender of last resort.
While Africa’s growth is expected to climb to 3.5% in 2019, up from 3% in 2018, according to the IMF’s own estimates, the fund is set to face growing lending pressure as economies on the continent struggle with the tailwinds of a tough global economic climate, and the impact of climate change on agriculture, migration and job creation amid burgeoning population growth.
The spillover of Africa’s own problems to the rest of the world has bolstered the continent’s relevance to the global agenda, says Masood Ahmed, a veteran economist of both the IMF and World Bank, and president of the Center for Global Development.
“Over the next 15 years, Africa is going to be a major client, partner and area of work for the IMF so it’s very important to recognise that what happens in Africa is important not just for Africa but for the world at large,” he says.
The fund serves a twofold function for economies: monitoring national economic trends, trade and growth forecasts, and negotiating programmes in nearly 20 African countries for financial assistance including emergency loans and financing for fiscal reforms.
Good news for Africa
As a veteran of the World Bank and European Commission, Georgieva brings with her a rich patchwork of knowledge and experience of developing countries spanning climate change policy, sustainability, gender equality and disaster management.
“Kristalina Georgieva brings a world of professional and personal experience, having worked in Africa and with African countries and African leaders,” says Ahmed. “This is not a managing director who is going to have to be educated about the situation or challenges facing Africa. This is somebody who comes with a long experience of having personally and professionally been engaged with the continent. That’s a big plus.”
Georgieva started her career at the World Bank in 1993 as director of the environment department, overseeing strategy, policies, and lending. In 2010 she left the bank upon her appointment as European Commissioner for Humanitarian Aid and Crisis Management.
During her four years in office she managed one of the world’s largest humanitarian aid budgets, presiding over a commitment of $950m for drought and famine relief in the Horn of Africa in 2011, and later providing $142m to refugee camps in Sudan and South Sudan.
In 2017 she returned to the World Bank as CEO of the International Bank for Reconstruction and Development and the International Development Association. In this post she directed sustainable development strategy and operations, strengthening her familiarity with African leaders and the challenges they face.
“The fact that she has the right exposure to development issues makes me feel confident that she’s going to follow and address the right questions for us,” says Dr Agnes Kalibata, president of the Alliance for a Green Revolution in Africa. “I was excited when I heard she was the next person to take on the job. She has her heart in the right place.”
With the effects of climate change already being felt on the continent, her experience will be an important asset for policymakers, says Ahmed: “The IMF has to start thinking about how climate change will affect macroeconomic policymaking and financial stability, and that’s really good news because it’s important for Africa. [Georgieva] comes with a lot of personal commitment to that agenda.
“Many countries in Africa are still beset with fragility and conflict, and macroeconomic management for these states requires a different way of thinking. I hope that she will be able to drive the agenda on macroeconomic engagement and the IMF’s role in fragile states. I think this is an area where the IMF needs to step up its role, and I think she will be the right person to lead it.
“For all those reasons, I’d say it’s very good news for Africa to have her at the head of the IMF.”
Baptism of fire
Georgieva will assume her new role at a time when the IMF is strengthening its engagement in Africa. Many countries on the continent grew wary of the fund during the debt crisis of the 1980s and 1990s, when a number of them became heavily burdened by interest charges on their loans. Since then the fund has made a comeback, with the value of lending amounting to over $7.2bn in 16 sub-Saharan countries at the end of 2017, more than four times its level three years before.
With 40% of countries in sub-Saharan Africa now either in debt distress or deemed high risk due to funds borrowed over the last nine years, a major challenge for the lender over the next five years will be to structure lending on sustainable repayment terms, and to ensure funds are spent on projects that translate into growth and export revenues.
“[African countries] have to make sure that the money that they take on to finance this investment is taken on in terms they can afford and doesn’t cause them debt distress down the road,” Ahmed warns.
On the first stop of a whistle-stop tour to rally support for her IMF candidacy, Georgieva was welcomed by President Abdel Fattah el-Sisi of Egypt. She praised the country for its successful economic reforms after it received the sixth and final tranche of a $12bn IMF loan in August.
Georgieva also won the support of President Paul Kagame of Rwanda, who tweeted: “Can’t think of a more suitable candidate. You have my country’s and my own support. Wishing you the best.”