IMF eyes relationship reset with biggest shareholder after Biden win

The election of Joe Biden as U.S. president gives the International Monetary Fund a chance to reset its relationship with its largest shareholder and make green initiatives a bigger part of its global economic recovery plan.

IMF Managing Director Kristalina Georgieva sent "personal" letters to President-elect Biden and running mate Kamala Harris this week, an IMF spokesman told Reuters, without providing any details about their contents. Trump has mounted legal challenges to the election results, thus far without evidence, but the Fund typically shies away from publicly commenting on elections until they are concluded.

Sources familiar with Georgieva's thinking say Biden's commitment to multilateral institutions and his pledge to re-enter the Paris climate agreement should help the IMF advance its own goals. Biden’s transition team did not respond to a question about communications with Georgieva and the IMF.

One IMF source said that some member countries are hoping Biden will reconsider the Trump administration's opposition to new IMF resources, including a general allocation of new Special Drawing Rights that could boost members' currency reserves by hundreds of billions of dollars. Treasury Secretary Steven Mnuchin has opposed such measures, which were last deployed during the 2009 financial crisis when Biden was Vice President. Mnuchin has also opposed a new increase in the IMF's quota resources that could boost the shareholding of China and other big emerging market countries, a move also executed when Biden was last in office.

"On SDR allocation we certainly hope that it will be possible to return to the issue," the source said, adding that past experience shows that a new quota agreement will be complicated no matter which party holds the White House. In nearly every speech, Georgieva also emphasizes the need to target fiscal stimulus spending to build a "greener, smarter and fairer" global economy while cutting emissions and building more inclusive societies - goals widely shared by the Biden team, whose transition slogan is "Build Back Better."

But the Trump administration has blocked inclusion of climate change in communiques issued by the Group of 20 major economies. The IMF last month forecast the global economy would contract by 4.4% in 2020, returning to growth of 5.2% in 2021, with emerging markets other than China hit considerably harder.

Georgieva has also run into resistance in her push for the G20 to look beyond a debt freeze for the poorest countries to include heavily-indebted small island states and other countries hit hard by the pandemic and the collapse of tourism. She will hammer home the need for public investment in a green economy during a meeting with global leaders at the Paris Peace Forum on Thursday, said another source familiar with the plans.

Due to appear in person with French President Emmanuel Macron, Georgieva will be joined at the event by the leaders of Germany, India and China - but not U.S. President Donald Trump. Georgieva told a joint conference hosted by the IMF and the State Bank of Vietnam on Tuesday that decisive action was needed to reduce the risk of long-lasting scarring from the pandemic and tackle other potential shocks, such as a climate crisis.

Eric LeCompte, executive director of the Jubilee USA Network, said the IMF was anxious to put more emphasis on issues such as climate change, the SDRs and more comprehensive debt-restructuring mechanism with the help of a new U.S. leader. "Even though we've seen a lot of progress and issues over the past six months, we haven't acted quickly enough to confront the coronavirus crisis," LeCompte said.