IMF get positive words from Sachs<\/p>\n
HONG KONG (Dow Jones): One of the International Monetary
\nFund's best-known critics, Harvard University Professor Jeffrey
\nSachs, had surprisingly positive words Wednesday regarding some
\nof the fund's more recent actions in Asia, particularly this
\nmonth's Indonesian bank closures.<\/p>\n
Speaking to an investment conference in Hong Kong on
\nWednesday, Sach's firm underlying message was his well-documented
\nview that the IMF fueled initial panic in Asia when it was called
\nto bail out Thailand, Indonesia and South Korea in the second
\nhalf of 1997 and that it went on to make many of the same
\nmistakes last year in Russia and South America.<\/p>\n
\"It seems to me the IMF was the most panicky of all,\" he said.
\nIt forced these program countries to jack up interest rates in a
\nblind defense of currencies and probably exacerbated the crises,
\nhe said.<\/p>\n
One of Sachs's biggest criticisms of the IMF's Asian track
\nrecord was its summary decision to force the Indonesian
\ngovernment to close 16 banks at the onset of its bailout program
\nin October 1997, something the IMF has since conceded was ill-
\nconceived.<\/p>\n
In contrast, the strategy employed when 38 more banks were
\nclosed by Indonesia and the IMF earlier this month was
\ncommendable, the Harvard professor said.<\/p>\n
\"I think this round of bank closures really is a much better
\nmodel,\" Sachs said.<\/p>\n
He also welcomed comments from IMF Asia-Pacific Director
\nHubert Neiss, made at the same presentation Wednesday, that the
\nlatest methodology was planned over nine months, incorporating
\nmany elements that aimed to suppress panic.<\/p>\n
\"I agree with you this time was a vast improvement. You can
\nsee that with quite dramatic announcements you get very calm
\nreactions. So I applaud the preparation this time around and
\nthink we've learned an important lesson that you don't do it from
\none day to the next, which is the way it was done back in 1997,\"
\nSachs said.<\/p>\n
\"I'm very, very happy to hear about these criteria on how to
\nclose banks and how complex it is to close banks,\" Sachs said.<\/p>\n
Further, Sachs said that much of the problem with the
\nWashington-based fund is beyond its control.<\/p>\n
Financial markets, he said, react too strongly to the IMF's
\nactions, ignoring prevailing fundamentals.<\/p>\n
\"A weakness of the international system is that everyone looks
\nto the IMF for the thumbs up or thumbs down. This is a bizarre
\nway to run the world,\" he told reporters at a briefing following
\nhis speech.<\/p>\n
Sachs said the fund's power comes not from its ability to
\ndispense money and countries' eagerness to secure it, but the
\nability of the IMF to sour on a government's policies and send
\nbankers for cover. \"What the IMF does, in ways which the markets
\nprobably by themselves wouldn't do, is stop massive amounts of
\nmoney,\" he said.<\/p>",
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