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Data scandal taints IMF head and World Bank

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The World Bank ought to be among the most trusted institutions. Credibility in the unassailability of its data is paramount, with billions of dollars of investment every year dependent on its information. At a single stroke, a data-rigging scandal engulfing Kristalina Georgieva, now managing director of the International Monetary Fund but relating to her time as World Bank chief executive, threatens to erode both her integrity and that of the development bank. The risk is that contagion spreads also to the IMF. She needs to do more to defend her position.

The scandal turns on allegations that Georgieva pressured staff to flatter China’s position in annual investment rankings at a time when the World Bank was seeking more money from the country, the development bank’s third-largest shareholder. An independent investigation by the law firm WilmerHale found that Georgieva involved herself in the rankings when it became clear that China would fall several places in the index. WilmerHale’s report alleges that underlings felt pressured to go along with orders from the top to massage the data. 

Georgieva has said she fundamentally disagrees with the report’s conclusions and has denied ever asking for data to be changed. But she has done so in a four-line public rebuttal and a brief private address and email to IMF staff. Employees at both organisations, and companies that have relied on the Doing Business rankings, deserve better. At the very least, she must give a detailed public account to address the allegations. Georgieva has told IMF staff she has refrained from commenting further out of respect for the board, which is conducting its own review. But to dismiss serious accusations that undermine the bank’s probity with her perfunctory denial is not good enough. Meanwhile, the IMF must ensure that any toxic work practices, as the WilmerHale report alleged Georgieva presided over as chief executive of the development bank, have not followed her to the fund. 

In response to the scandal, the World Bank has shelved its Doing Business annual index. That is a good thing. Even before the present fracas, there were misgivings over the report’s methodology. A World Bank economist, Paul Romer, even resigned in protest over alleged political bias. Ostensibly a yardstick measuring the ease of doing business in a country, it quickly became shorthand for a country’s ability to attract foreign direct investment, with countries expressly changing policies to score better.

With so much resting on a ranking, it is obvious that some countries, which are also the bank’s shareholders, may try to influence the outcome. The essence of the current scandal is that they may have succeeded. 

It would be a great pity, however, if economists and businesses were denied the data that underpinned the index. Far better would be a more discursive approach, such as that used by the IMF’s World Economic Outlook, which details countries’ progress or setbacks but does not present the data as a league table. Rankings, whether of universities, tycoons or countries, will always be susceptible to machinations. If an index is felt the most efficient method, then it should be more transparent. The WilmerHale report suggested an independent data audit. Another idea would be to publish raw data immediately, allowing third parties to crunch them. 

Georgieva’s two years at the IMF have been otherwise solid. All the more reason she must not sweep this scandal under the carpet. The longer questions go unanswered, the more damage is done.

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