On May 18, the Fund’s Managing Director Mr. Dominique Strauss-Kahn tendered his resignation in the wake of his arrest and trial on a charge of sexual assault by him in New York three days earlier. The election of a successor will be the first major test of credibility of Fund’s even-handed role when its 187 member-countries make the choice through the 24-member Executive Board, with due regard to the new governance reforms, shepherded by Mr Strauss-Kahn himself.

The world’s prestigious institution was shockingly thrown out of gear for a while and the Executive Board at an emergency meeting appointed Mr John Lipsky, First Deputy Managing Director, as acting Chief. Mr Lipsky himself is due to retire in August. But the Executive Board will shortly announce the process for selection of successor to Mr. Dominique Strauss-Khan, who had been widely acclaimed for giving new policy directions to the Fund and ushering in the reforms to provide greater voice and representation for emerging economies and other developing countries.

His arrest on a day he was boarding a plane for Europe to guide EU leaders on overcoming Greek sovereign debt crisis also led to more uncertainties for the debt-distressed peripheral countries of the 16-nation Eurozone, which has been desperately trying to maintain the stability of euro and the viability of the decade-old single monetary union. European leaders are divided over a second bail-out for Greece, with its economy contracting by 4 per cent and its social fabric torn apart by the austerity and reforms imposed under the first EU-IMF bail-out of 160 billion dollars in May 2010.

Mr Strauss-Kahn (62) of the French Socialist Party, a former Finance Minister and a likely candidate for the French Presidency, had earned a reputation for a pragmatic approach to fiscal problems of countries in need of help. In the aftermath of the global financial and economic crisis, IMF under his leadership, had drawn appropriate lessons with marked departures in its long-held dogmas, readjusting its sights to social imperatives as much as to fiscal purism. IMF has left it to countries to determine, according to their circumstances, to regulate capital inflows with control, as a last resort, as against its attachment hitherto to concept of freedom of capital and to countries moving ultimately toward lifting of capital controls.

The Fund also was nudged to move from tenets such as labour market flexibility in confronting job market issues. In recent speeches, the former IMF Chief had underlined the magnitude of global unemployment which called for stabilization policies through fiscal and monetary measures to strengthen and sustain the ongoing recovery and job-creating growth. Also, IMF has vastly enlarged its pool of resources with heavy demands for assistance from not only developing countries but, to a larger extent, from the heavily-indebted economies in Europe, where the Fund has had to supplement the bail-outs for EU for its member-countries, though the latter has so far failed to come up with a “comprehensive solution” repeatedly urged by IMF. Above all,, IMF gained more credibility, relevance and legitimacy by providing for greater voice and representation for emerging economies and other developing countries reflecting their weight in global economy.

In his letter of resignation, Mr Strauss-Kahn said he with colleagues in the Fund had together accomplished “great things” over the last three years. He wanted to “protect this institution which I have served with honour and devotion”. He would devote all his strength and energy to prove his “innocence” in the criminal proceedings against him. The outgoing IMF Chief is now on bail but would remain in New York to stand the trial.

The arrest of Mr Strauss-Kahn on serious charges had instantly set off speculation across Europe and Asia – even before he wrote his resignation – and Europeans led by German Chancellor Angel Merkel was vociferous in backing another European to head IMF, especially at a time Euro-Zone was going through the ordeal of rescuing debt-afflicted peripheral countries – Greece, Ireland and Portugal and possibly more countries. IMF participation in the three bail-outs so far had imparted strength to EU leaders and this is one consideration weighing with them in pressing for another European at the helm in the Fund.

The most favoured European in view is the French Finance Minister Christine Lagarde (55), known among her global colleagues for her negotiating skills and strong leadership. She would be the first woman to head IMF in case of his selection by consensus. The best candidate, irrespective of nationality, should be chosen, is the refrain from other financial officials outside the Eurozone. Across Asia, China, India, Thailand and the Philippines besides Japan officials are generally agreed that the election should be through an open, transparent process and on the basis of ability. This is also in line with the understanding within G-20.

While calling for representation for emerging economies, China hopes its present top official at the fund Zhu Min would become a Deputy managing Director. In India, the IMF veteran Mr Montek Ahluwalia is the obvious choice but he himself said he was not vying for it but would “wait and see” how the situation develops. Thailand and the Philippines see no reason why the opportunity should not be used to break with the old tradition of a European heading IMF always. Indonesia would favour Singapore’s Deputy Prime Minister Mr Tharman Shanmugavelu as a “good choice” with his experience of the IMF. Another candidate who has offered himself is Turkey’s Mr Kemal Dervis, formerly with the World Bank and a one-time Finance Minister, who successfully negotiated a large bail-out when Turkey was hit by a financial crisis in 2001.Other aspirants include former British Prime Minister Mr Gordon Brown who had for long headed the IMF’s policy-making committee.

Under IMF procedure, he or she is appointed by the Executive Board for a renewable term of five years. Although the Board may select a Managing Director by a majority of votes cast, the Board in the past has made such appointments by consensus. In 2007, when Mr. Strauss-Kahn was appointed, the Board decided on additional criteria: A successful candidate (from any of the 187 member-countries) should have a distinguished record in economic policy making at senior level and outstanding professional background with demonstrated managerial and diplomatic skills. The Board further said although the selection of Managing Director may be by majority of votes in the Board, the objective is to select him by consensus. The only way of selecting a non-European would be for countries in BRIC and other leading developing countries to agree on a person who would be best suited for the job and that is also regarded as the only way to block a selection of the strong European favourite, Ms. Lagarde of France. There does not seem to be a near possibility of such an agreed Asian choice. (IPA Service)