Crises propel IMF to leadership role in 1997
DPA
Washington, Dec 28: What a year for the international monetary fund: responding to currency crises throughout east Asia beginning in July, IMF poured so much cash and so many policy prescriptions into the region that it arguably surpassed the united nations as the most powerful international organisation.And if the bail-outs work and Asia returns to financial stability and economic growth, the fund's energetic managing director, Michel Camdessus, may emerge as the world's most influential and reviled international bureaucrat. Who else could declare the end of Korea Inc. As a model for economic development in Asia while strong-arming Thailand and Korea to adopt western-style financial reforms? Emergency loans organised by the IMF for Thailand, Indonesia and South Korea totalled more than 100 billion dollars of that, 35 billion dollars were to come from the IMF's coffers, the rest from other organisations and bilateral donors such as the United States, Europe and Japan. The panic and uncertainty in
the Far East has given the diminuitive camdessus the air of a financial James Bond, making secret visits to foreign capitals urging reluctant leaders to take drastic action and avert disaster. When he travelled clandestinely to Seoul in November, however, Korean leaders had a tremendous difficulty in recognising the facts , Camdessus said.The IMF's new visibility, which began two years ago with the Mexican peso crisis, has attracted a fair degree of criticism and raised questions, both in Washington and in the capitals which are having to restructure their economies to meet Camdessus' conditions for aid. To what extent are Camdessus and the IMF a multilateral stalking horse for western treasury ministers such as Robert Rubin of the United States or Germany's Theo Waigel?industrial countries can avoid charges of meddling in Korea's domestic affairs by shifting the focus to the IMF, which in theory represents the will of the international community . But Camdessus, who began his third five-year term at
the IMF helm in 1997, has proven skillful at using crises to build his own power and the prestige of the fund, often irking the industrialised nations by urging more money for the IMF. And of course, if the bail-outs fail, the international community may just point to Camdessus and the IMF as scapegoats for economic disaster. Camdessus' critics, such as Harvard University professor Jeffrey Sachs, argue that the IMF has become an international super-agency, acting in secret with no accountability to an electorate or other public.The IMF is vested with too much power, Sachs wrote recently in London's Financial Times. No single agency should have responsibility for economic policy in half the developing world.Other critics say the bailouts send the wrong message by rescuing international bankers in New York, London or Frankfurt from unwise decisions. One of the reasons we have Asia is that we bailed out Mexico, former US Federal reserve governor Lawrence Lindsey told the Washington Post. DPA We signalled
to creditors around the world that you could feel free to lend in Asia, and the US treasury and the IMF would bail you out if you got in trouble. Now if we bail this one out, we'll have established a second precedent, and the next time, it will be bigger and arguably something we can contain less easily, he said. Camdessus has acknowledged that the IMF did not see the crisis coming. We did not foresee last July that we would have such a formidible crisis in December, he said recently. But he noted that as early as 1996, the IMF had urged Korea to strengthen its foreign exchange reserves and reform its financial sector. In September, IMF officials urged Seoul to strengthen its macroeconomic stance in response to Thailand.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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