Asia hits all the right notes, warming up to 'friend' Lagarde

Lagarde, it’s time to walk the talk. Not long ago, she was in Asia, as part of her efforts to drum up support for her candidature for the IMF chief’s post. Now that it has become a reality, she has to go the distance to honour those pledges.

[caption id=“attachment_33627” align=“alignleft” width=“380” caption=" Lagarde begins her 5-year term as managing director of the International Monetary Fund on July 5. Gonzalo Fuentes/Reuters"]  [/caption]

It’s a tall order, by any means. She had made all the right noises then, acknowledging that countries such as China and India deserve increased IMF voting power commensurate with their growing economic clout, and a fair shot at the emergency lending institution’s top decision-making posts. In return, Asia did its bit, which didn’t put up any candidate against her and Mexico’s Agustin Carstens.

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“Lagarde is a friend of India,” a senior Indian government source said. “We can’t get the IMF managing director’s chair for now, but at least India can get some high-level appointments in the IMF during her tenure and we will work towards that.”

Lagarde begins her 5-year term as managing director of the International Monetary Fund on July 5, and will find herself immediately immersed in efforts to head off a Greek debt default that could spark an international crisis.

High on her to-do list within the Fund will be appointing a top leadership which fairly reflects global economic influence, and shepherding through an already agreed process to reallocate IMF voting rights to give emerging markets greater say. “Lagarde has been more successful in consensus building to bridge relationships between advanced countries and emerging markets,” Indonesia’s central bank deputy governor Hartadi A Sarwono told Reuters.

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She will need those skills for the difficult personnel decisions. The United States is already considering putting forward a Treasury Department official for the No. 2 role, which has traditionally been filled by an American.

Breaking with that tradition might help convince Asian countries that Lagarde is serious about reforming the IMF, although there was no indication that she had made any promises to award the second-in-command role to someone from Asia.

Singapore Finance Minister Tharman Shanmugaratnam, who also chairs the IMF’s steering committee, said he had spoken to Lagarde about the importance of IMF reforms that “reflect the evolving balance in the global economy and financial system.”

Even countries that had backed Lagarde’s challenger, Carstens, pledged their support. Australian Treasurer Wayne Swan said he had worked with Lagarde through the Group of 20 club of rich and emerging countries, and welcomed her appointment. “We’re very happy to see the process concluded so this important institution can continue its work,” Swan said through a spokesman.

(With inputs from Reuters)