Times of Trouble: Can Christine Lagarde Lead the IMF Through its Toughest Period?

To most regular observers, the appointment of Christine Lagarde as IMF’s Managing Director came as no surprise. Lagarde had been seen as the overwhelming favourite to replace Dominique Strauss-Kahn and was duly elected despite calls for a candidate from an emerging economy.

However, the challenges for Lagarde are great. While Lagarde may undoubtedly have the credentials to run one of the world’s most influential financial organisations, doubts will remain over her actual ability until she proves herself worthy of the role. Former IMF Chief Economist Raghuram Rajan believes that Lagarde arrives at a pivotal, but extremely challenging, period for the IMF wherein her success, or failure, may have a deep impact for the world economy.

Raghuram Rajan served as IMF’s Chief Economist from September 2003 to January 2007. In 2003, Rajan was the inaugural recipient of the Fischer Black Prize awarded by the American Finance Association for contributions to the theory and practice of finance by an economist under the age of 40. Rajan is currently the Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago, and was voted by Economist readers as the economist with the most important ideas in the post-financial crisis world.

CHICAGO – Now that the dust has settled over the selection of the International Monetary Fund’s managing director, the IMF can return to its core business of managing crises. Christine Lagarde, a competent and well-regarded technocrat, will have her hands full with three important challenges.

The first, and probably easiest, challenge is to restore the IMF’s public image. While the criminal case against Dominique Strauss-Kahn on sexual-assault charges now seems highly uncertain, the ensuing press focus on the IMF suggests an uncontrolled international bureaucracy with unlimited expense accounts, dominated by men with little sense of restraint.

Fortunately, the truth is more prosaic. Top IMF staff face strict limits on their allowable business expenses (no $3,000 per night hotel rooms, despite reports in the press), and are generally underpaid relative to private-sector executives with similar skills and experience.

Source :  Economy Watch