Bulgarian economist Kristalina Georgieva is emerging as a powerful voice for the poor, as the coronavirus pandemic that has plunged the world into recession threatens to tip developing countries into chaos.
The chief of the International Monetary Fund grew up behind the “Iron Curtain” of the Soviet Union, and has frequently recalled how painful it was to see her mother’s life savings disappear overnight during the 1990s currency crisis.
She has been blunt about the need to save the world’s poorest countries, who account for a quarter of the global population, from a similar plight.
The impact of the coronavirus is magnified in emerging markets by crowded conditions, plummeting commodity prices and massive capital flight.
Together with her former boss, World Bank President David Malpass, and the World Health Organization, Georgieva is pushing China, the United States and other Group of 20 nations to temporarily suspend some $14 billion in debt service payments by the poorest countries owed through year-end.
“These are the times for which the IMF was created – we are here to deploy the strength of the global community, so we can help shield the most vulnerable people and revitalize the economy,” she said in a speech on Thursday, ahead of next week’s IMF and World Bank Spring Meetings. “They urgently need help.”
Georgieva, who took over as director in October 2019, is the first person from an emerging market economy to run the IMF, which was formed to reverse the debilitating effects of economic nationalism after the Great Depression.
Described by colleagues as a “force of nature,” “relentless” and a “machine,” Georgieva’s crisis management has featured video selfies to staff and midnight phone calls with government leaders.
She has warned of the dangers of the outbreak since it was still largely contained to China, telling hundreds of policymakers at the Munich Security Conference in mid-February: “We have to pray for the best and prepare for the worst.”
Since then, the virus has spread to scores of countries and killed more than 100,000 people.
Last week, Georgieva issued another warning. “There is no question that 2020 will be exceptionally difficult,” she said. Things could get even worse in 2021, she said, depending on what actions rich countries take now.
$100 BILLION IN OUTFLOWS
Europe and the United States have struggled to contain the virus. Poorer countries, with weaker health systems and densely-packed slums are also more vulnerable, economically. Many are saddled with record high debt, rocked by a plunge in commodity prices, and have seen $100 billion in capital flight, Georgieva said.
Her negotiating skills will be tested at the IMF and World Bank Spring Meetings this week. The talks, which will be held online instead of bringing more than 10,000 people to Washington, will be pivotal to debt relief efforts.
Georgieva is “doing everything she can,” said James Boughton, the Fund’s former official historian. “But she can only do so much without guidance from the G20. Ultimately the IMF is an agent of the large rich countries.”
Even as the United States under President Donald Trump increasingly embraces nationalism, Georgieva has the respect of some senior members of his team.
“She is an effective leader and deeply committed to the IMF’s mission,” U.S. Treasury Secretary Steven Mnuchin told Reuters in a statement. “And I am fully confident that she will lead the Fund with vision and creativity through this challenging period.”
Her connections to another powerful global force, the Vatican, helped her defuse a looming crisis with
Argentina after the 2019 election of a government that campaigned against the IMF. Georgieva and Argentine Finance Minister Martin Guzman paved the way for better relations during a during a February conference hosted by Pope Francis, according to Eric LeCompte, executive director of Jubilee USA Network, a nonprofit financial reform organization, who also attended.
“It’s a blessing that we have someone with a development background at the helm of the IMF. I believe that’s why we’re seeing quick movement on some fairly bold proposals to save us from a financial crisis or another Great Depression,” he said.
When G20 finance officials refused to classify the coronavirus outbreak as a major risk factor in February, Georgieva published the IMF’s own, dire, outlook.
And as pandemic spread beyond Asia, she convened two extraordinary meetings of the IMF’s steering committee in less than month, something that had never been done before, and appeared at a rare joint briefing alongside Malpass to discuss emergency measures.
Details of the debt relief proposal are still being finalized, but Georgieva’s efforts seem to be working and G20 finance officials are likely to endorse a temporary freeze in debt service payments, according to two sources familiar with the process.
“She’s blunt and doesn’t pull any punches,” said Sonja Gibbs, managing director of the Institute for International Finance, which includes more than 450 banks, hedge funds and other global financial firms.
“As we address the debt risks, it will be a very good thing to have someone at the end of the table that takes an open approach to communication.”