---------------------------------------------------------- FREE for JOIN Indonesia Daily News Online via EMAIL: go to: http://www.indo-news.com/subscribe.html - FREE - FREE - FREE - FREE - FREE - FREE - Dengan mengClick banner sponsor anda menyumbang Rp. 1000,- untuk HomePage IndoNews. ---------------------------------------------------------- Wednesday January 20 1999 IMF admits bailout blunders SHEEL KOHLI in London The International Monetary Fund has admitted making grave errors that may have exacerbated the Asian financial crisis. In a highly critical assessment of its response to the crisis, the fund said yesterday that reforms in the worst-hit countries might fail and that a sustainable return to growth was not assured. In particular, it said key reform programmes for Indonesia, South Korea and Thailand had failed to rapidly restore confidence in the region. The programmes were not adequately financed to rebuild confidence, and analysis of the global financial architecture needed to be stepped up, including a larger role for the private sector. Releasing the 147-page report, entitled "IMF Supported Programmes in Indonesia, Korea and Thailand: A Preliminary Assessment", the IMF sought, however, to defend some of its policy prescriptions, without which the crisis could have been worse. "The programme projections badly misgauged the severity of the downturn," the IMF said. "However, it should also be noted that very few foresaw the severity of the downturn - neither the authorities, the private sector, nor academic observers." The IMF's evidently poor economic growth forecasting was due partially to its assumption that the reform programmes would proceed as planned. However, it also faced pressure to be consistent with government forecasts and to not be overly pessimistic for fear of wreaking more damage to regional economies. "However, this may have been counter productive as the failure of the optimal projections to be realised may itself have undermined confidence in the programme." The IMF defended its decision to allow currencies to float rather than repeg or conduct staged devaluations. "There was no viable alternative scenario since repegging would have required subordinating monetary policy exclusively to the defence of the currency and, given available reserves and financing, the rate that would be defensible against short-run market pressures would have been too depreciated to be appropriate for the medium term," the report said. The fund admits it failed to predict the massive capital flight that followed the outbreak of the crisis. "Restoring confidence quickly was intrinsically difficult given the state of [the countries] reserves, the volatility of market sentiment and the array of structural problems that had to be dealt with," it said. It also conceded that the policy on intensive structural reforms, with particular emphasis on the financial and banking sector, might have come at the expense of other areas of reform, such as strengthening social safety nets and the liberalisation of trade and capital flows. The IMF conceded it was difficult to dismiss criticisms that programmes suffered from an "overload" of structural reforms. "Important questions remain . . . regarding the appropriate pace and sequencing of reforms and the emphasis on different areas of reform - as exemplified by the fact that, over time, the programmes have tended to become more sharply focused on the core of financial and corporate restructuring." Policy development and review department director Jack Boorman said the IMF also realised more input from regional authorities was needed in shaping policy. Mr Boorman hinted the IMF had been too remote from the situations in the three countries, detracting from the effectiveness of their decisions. "You can't force a package on a country from Washington and expect that country to forthrightly implement it. [Local] authorities have to buy into policy formulation," he said. The IMF believes its monetary policy prescriptions were successful in reversing exchange-rate depreciation in Korea and Thailand, although not in Indonesia where "monetary developments went severely off track, reflecting political turbulence and extreme financial sector weaknesses". Similarly, it said its much-maligned fiscal policies, which may have had some detrimental effects initially on countries, were gradually loosened and served to boost, rather than Back To Top The programme projections badly misgauged the severity of the downturn Archived Stories: IMF rounds on World Bank, says pain was inevitable Neiss admits bailout strategy errors Global confidence hit by funding doubts IMF weighs crisis rethink Front Page | Hong Kong | China | Asia | World | Business Markets | Focus | Sport | Property | Technology | Index [SCMP Home] [Classified Post] [1997] [Internet Business Centre] [SCMP Global Investor] [Your Money] SCMP Contact Information | Letters To The Editor Copyright �1998 South China Morning Post Publishers Ltd. All Rights Reserved. ++++++++++++++++++++++++++++++++++++++++++++++++++++ Didistribusikan tgl. 20 Jan 1999 jam 10:42:26 GMT+1 oleh: Indonesia Daily News Online <[EMAIL PROTECTED]> http://www.Indo-News.com/ ++++++++++++++++++++++++++++++++++++++++++++++++++++
