World Bank names crisis expert as new chief economist

Carmen Reinhart's career has spanned stints at Bear Stearns and the IMF as well as academia. Photo / Getty Images

Carmen Reinhart, a Harvard University professor who specialises in international financial crises and economic meltdowns, is to be the World Bank's new chief economist, the multilateral lender announced on Wednesday.

Ms Reinhart, 64, will replace Penny Goldberg, who left the post in March after just 15 months in the job to return to Yale University.

Ms Reinhart's arrival at the World Bank comes as the Washington-based development lender is trying to help shield low-income countries and emerging markets from the global recession and market turmoil triggered by the coronavirus pandemic.

Ms Reinhart is best known for her work with Kenneth Rogoff, another Harvard University economist, on the severe economic damage inflicted by financial crises throughout history, which was especially relevant during the Great Recession of 2008-09.

Ms Reinhart was born in Cuba before moving to the US with her family and launching a career that spanned stints at Bear Stearns and the IMF as well in academia.

She will be taking over as many developing economies are facing severe stress, including a jump in poverty and capital outflows — as well as the plunge in commodity prices — because of the pandemic.

"The hit to emerging markets is just very broad. Nigeria is in terrible shape. South Africa is in terrible shape. Turkey is in terrible shape. Ecuador already is in default status, as well as Argentina. These are big emerging markets. It's going to be enormously costly," Ms Reinhart recently told Bloomberg Markets in an interview with Mr Rogoff.

Ms Reinhart also urged China to support debt relief for emerging markets, which is seen as critical given the flood of infrastructure loans supplied to developing economies through its Belt and Road Initiative in recent years.

"The largest official creditor by far is China. If China is not fully on board on granting debt relief, then the [G20] initiative is going to offer little or no relief. If the savings are just going to be used to repay debts to China, well, that would be a tragedy," she said.

David Malpass, the president of the World Bank, said Ms Reinhart's arrival would help "boost our efforts to restore growth and meet the urgent debt and recession crises" affecting many countries.

"Carmen has dedicated her career to understanding and surmounting financial crises in both advanced and developing economies in order to achieve growth and higher living standards," Mr Malpass said.

Ms Reinhart's research has also stoked controversy. Most notably, a 2010 paper co-authored with Mr Rogoff — which concluded that debt-to-GDP levels exceeding 90 per cent would impair growth — was attacked for containing spreadsheet errors and fuelling austerity policies in the wake of the crisis.

Written by: James Politi

© Financial Times 2020