The sanctity of statistics within those organisations is held to be one of the highest public goods. Such is the vitriol in these data disputes that they could result in the forced exit of the leaders of both institutions.
Those stakes explain why 16 African ministers published an open letter on 4 October praising the work of IMF Managing Director Kristalina Georgieva describing her as a ‘true partner’ to the continent who had rapidly mobilised critical funding for the countries worst hit by the pandemic.
In truth, the arguments between the Bank and the Fund also touch on differences of policy, personality and geo-politics. By focusing on questions about data, the protagonists have ensured the dispute is now on the agenda of the board of the IMF.
Claims of data manipulation
Under the Presidency of David Malpass, a personal friend and the nominee of Donald Trump, the World Bank’s Ethics Committee ordered an investigation into claims of data manipulation.
The probe, carried out by DC law firm WilmerHale, focused on the Bank’s Doing Business rankings, specifically allegations that data on China, Saudi Arabia and Azerbaijan had been fixed in the 2018 and 2020 edition of the rankings. Georgieva was Chief Executive Officer of the World Bank in 2018 ; a year later she was appointed Managing Director of the IMF.
China was ranked 78th in the 2018 index but critics say it should have fallen a few notches. The fact that it did not, they say, was because the Bank staff, led by Georgieva and then President Jim Yong Kim, omitted specific criteria.
Motivating this fix, continue the complainants, was Jim’s and Georgieva’s determination to secure Beijing’s support for a capital increase for the Bank. A shabby quid pro quo. In the diplomatically-padded world of international finance, accusations don’t get much more barbed than these.
Sharply divided opinion
WilmerHale submitted a 15-page report in August which duly skewered Georgieva. But it has sharply divided opinion within and around the institutions.
Calling for an ”expeditious resolution of the matter,” Georgieva said on 6 October “the WilmerHale report does not accurately characterise my actions with respect to Doing Business in 2018 nor does it accurately portray my character or the way I have conducted myseld over a long professional career.”
She is not the only figure in the drama to reject the WilmerHale report. Former chief economist of the World Bank Joseph Stiglitz describes it as a “hatchet job” and proceeding on innuendo, having spoken to all sides in the argument.
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He points out that Shanta Devarajan, a former Vice President of the Bank’s Africa department and head of the Doing Business team in 2018, insists he was never pressured to change data or results.
Devarajan was interviewed by WilmerHale but complained of their partiality: “…I spent hours telling my side of the story to the World Bank’s lawyers, who included only half of what I told them.”
Another problem with the report is its contention that the World Bank was desperately seeking China’s support for a capital increase in 2018. But this would have been unnecessary as Beijing had made it clear that it would back a capital increase for the bank and wanted to expand its national stake in it at the same time.
Nevertheless, WB President Malpass has defended the WilmerHale report with its insinuations against Georgieva. When asked for a more detailed comment, he said the report “would speak for itself.” It may yet do so but in ways less amenable to Malpass.
WB fixing data?
On the allegations that World Bank staff fixed data for the ‘Doing Business’ reports on Saudi Arabia and Azerbajain, the WilmerHale report has little to say other than it found no evidence linking Malpass to those attempts.
Perhaps it should look again. Malpass presided over a record leap of 30 points for Saudi Arabia in the ‘Doing Business’ rankings in 2020. It moved to 62 from 92 in the table.
That’s remarkable enough. But the ‘Doing Business’ boost for Saudi Arabia came in the wake of Malpass’s trip to Riyadh in 2019. Then he lavished praise on the government of Crown Prince Mohammed Bin Sultan, who had been a close ally of the Trump Adminisration.
A year earlier the US’s CIA and Turkish security had deemed the Crown Prince responsible for organising the torture and murder of dissident Jamil Khashoggi in the Saudi consulate in Istanbul. This followed the arbitrary detention and torture of some 400 leading businessmen and royal family members in Riyadh, accused of corruption and disloyalty. Not necessarily the best way to improve the business climate.
Another question for Malpass is the conclusion of an investigative report that he has blatantly tried to change the methodology of the Doing Business rankings to ensure that China was moved further down.
One happy outcome of this imbroglio is that the flaws of the ‘Doing Business’ rankings have been exposed for all to see and the Bank has been forced to suspend its publication. Despite this, Malpass is yet to answer criticism, let alone accept responsibility for its treatment of Saudi Arabia and China.
Stiglitz says it’s good riddance to the ‘Doing Business’ rankings under which countries were marked up for lower corporate tax rates and weaker labour protections. “The numbers were always squishy, with small changes in the data having potentially large effects on the rankings. Countries were inevitably upset when seemingly arbitrary decisions caused them to slide in the rankings.”
The battle over these rankings reflects a wider rivalry between the Bank and the IMF which has sharpened since the pandemic laid waste to so many developing economies.
Malpass and his aides, criticised for a laggardly response the pandemic’s economic effects and weak leadership on getting an international agreement on developing country debt, have been sniping at the IMF for moving beyond its traditional remit of financial stabilisation.
Under Georgieva, the IMF declared its priorities are fighting climate change and inequality. That has meant a shift towards more progressive anti-poverty policies and a delineation of the limits of the markets.
If Georgieva’s opponents are able to force her out of the IMF, using this confected dispute data as the pretext, many officials and activists in Africa and beyond would see it as a sad reversal of much-needed reforms to the organisation’s role.
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