News Of Economy

Rato shocks one and all, says will quit IMF in October

April 7, 2012

The world has not gotten quite over what happened at the World Bank recently, and to make things even more interesting, it seems that IMF is also on the verge of witnessing a change at its helm. Rodrigo de Rato the managing director of the IMF has announced that he will step down come this October due to some ‘personal reasons.’ In a shock-announcement, Rato said: I have taken this decision for personal reasons. My family circumstances and responsibilities, particularly with regard to the education of my children, are the reason for relinquishing earlier than expected my responsibilities at the Fund. Rato, now 58, a former Spanish finance minister was appointed at the top of the IMF in 2004 and was to hold office till 2009. But his decision to resign midway through his term, needless to say, has caused a great turmoil at the institution by taking everyone by surprise. IMF – struggling to find relevance Gone are the days of the Asian and Latin American economic crisis. Then (early nineties) IMF was every bit relevant and instrumental in averting economic meltdown in various parts of the world. A decade later, Asian economies have grown manifold and IMF has been struggling to determine its role in global ‘surveillance’ of currencies. Its pleas to overhaul and improve the system have fallen on deaf ears. Earlier this month, however, it had announced a set of new guidelines to regulate the foreign currency policies of the countries around the world. A move apparently directed towards China, whose foreign exchange coffers are burgeoning. Of course, IMF’s largest contributor, America, would be pleased too. The IMF remains cautious of the spectacular failures of its policies in Argentina in 2001. Recent successes Turkey and Brazil have done little to assuage those wounds. Another bone of contention has been the lack of input from the growing economies like china, India, and Brazil. Their voices have been virtually insignificant in the workings of the Fund. Under the present circumstances, it is anything but fair. Old controversy revisited The next obvious question is who will succeed Rato? More than likely it will be a European. In a tradition that goes to the founding days of the International Monetary Fund and the World Bank in Bretton Woods, the heads of the institutions are handpicked from Europe and US respectively. Only recently we had seen a great furor over the appointment of a successor of Paul Wolfowitz at the WB. People called for scrapping the ancient practice but George Bush stuck to his guns and appointed Robert Zoellick at the top. There are reasons to expect that IMF will break this ritual. For one, Rato had himself called for a ‘transparent procedure for the selection of the managing director.’ Another reason to expect a change is the fact that the European countries were the first ones to demand an open election to the post of the President at the WB. Their recent stance puts pressure on them to follow-up. Rato had been successful during his time at the top. His resignation has, however, rejuvenated a dying debate. Coming months will be very interesting as the European torch-bearer struggles to come up with a suitable name which would define it over the next few years. Image Source

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