Rato has experience of the IMF's work in South America

Mr Rato - who had been widely tipped for the job - is credited with turning around Spain's economy.

He became available for the position after Spain's conservative government lost the recent general election.

The choice continues the custom, criticised by many developing states, that a European gets the top IMF job.

Mr Rato replaces the German Horst Koehler, who resigned in March to become president of Germany.

Argentina role

Born in Madrid to a wealthy family and the owner of a group of businesses, Mr Rato, who is 55, speaks excellent English thanks to his time studying at the University of California in the 1970s.

A key figure in the previous Spanish government, he pushed through market-orientated reforms, such as privatisations, and stabilised the country's public finances.

His main competition for the IMF post was thought to be Frenchman Jean Lemierre, who is head of the European Bank for Reconstruction and Development (EBRD).

It is the custom for the head of the IMF to be a European, while the head of the World Bank is an American.

Funded by 184 member countries, the IMF gives advice and lends money to bring about economic reform.

Mr Rato played an important role as an intermediary in the IMF's most difficult case of the past few years: the default of Argentina in 2001.

He helped secure an IMF loan for Argentina after it devalued its currency, which had been linked to the US dollar, and defaulted on $141bn of private sector debts - the largest such default in IMF history.

Mr Rato has also urged the IMF to improve its early warning systems so that it gets wind of future crises in good time.