Looking into the IMF mirror: Thailand's experience<\/p>\n
BANGKOK: Today is the fourth anniversary of the day that
\nThailand joined the International Monetary Fund program following
\nthe economic and financial crisis of July 2, 1997, when the baht
\nwas untied from the US dollar. Some may remember that it was a
\npopular move because confidence in the government of the day to
\nhandle the sinking economy was very low. But many may also
\nremember that the credit line extended to Thailand from the IMF
\nto weather the economic storm came not only with bitter medicine
\nbut some wrong doses as well. When the last government decided to
\ngraduate from the IMF program last year, it was a fairly popular
\nmove.<\/p>\n
In truth, nobody likes creditors who are always going to make
\nsure that the money they have lent will be properly spent and
\nthat customers have the ability to make repayment. And to be
\noutside rather than under the IMF umbrella is something a country
\nshould strive for. The ultimate message is: "Take good care of
\nyour macroeconomic management, and you will be free from external
\ncontrol."<\/p>\n
Thailand today remains a member of the IMF and is repaying its
\nloan to the Washington-based institution. The IMF still makes
\nregular comments on the state of the Thai economy and public
\npolicies. And the agency does make some direct comments when the
\nsituation calls for it, regardless of what the government of the
\nday thinks.<\/p>\n
We should look at such comments as a mirror on the economic
\npolicies that the government is subjecting the country to. There
\nshouldn't be any hard feelings or overblown reactions. After all,
\neconomics is also an art and not just a science. Furthermore, not
\nmany experts in the country want to speak out against the
\ngovernment at this time. So there is an even greater need for
\nalternative views from the outside.<\/p>\n
Moreover, if we have learned anything from the 1997 crisis, it
\nis not to be arrogant and close our ears. Not that the IMF did
\nnot make key mistakes in handling the Thai crisis. The most
\nserious one was to pursue the traditional policy of jacking up
\ninterest rates, which led to a further plunge in the economy. But
\nmany may also remember that the IMF had repeatedly told the Thai
\nauthorities -- both ministers and central-bankers -- to detach
\nthe baht from the fixed exchange system. The advice was ignored
\nand resulted in a bigger crisis than anyone could have imagined.<\/p>\n
Last Friday, the IMF came up with a review of the Thai
\neconomy. It seems to have given broad approval, though not
\nwithout reservations, to the economic policies of Prime Minister
\nThaksin Shinawatra. Thaksin earlier had been angry at the IMF's
\ncounter-argument to the government's move to raise interest
\nrates. The IMF is now careful in its choice of words.<\/p>\n
"Most directors expressed concern at last June's increase in
\ninterest rates, which was undertaken for objectives outside the
\nscope of the inflation-targeting framework, and in the absence of
\ninflationary pressures cautioned against further increases which
\ncould undermine policy credibility, threaten the recovery and
\njeopardize the financial position of banks and corporations," the
\nIMF said.<\/p>\n
IMF directors also welcomed the Thai authorities' stated
\nintention not to increase interest rates for the rest of the
\nyear, but the notice added: "In view of the weakening recovery,
\nsome directors thought that lowering interest rates shouldn't be
\nruled out."<\/p>\n
Speaking in response to the IMF statement, Thaksin told
\nreporters on Friday that there was no need for a reduction in
\ninterest rates at this time, because rates were still very low.<\/p>\n
Another difference in degree, if not in principle, appeared
\nover the issue of central-bank independence. The IMF urged the
\nThai government to press ahead with legislation to enhance the
\nagency's independence.<\/p>\n
In response to the IMF statement, Finance Minister Somkid
\nJatusripitak said: "The government hasn't intervened in the
\ncentral bank's work. However, the central bank's independence
\nmust be under the framework of the government's overall policy."<\/p>\n
We should regard these exchanges as healthy. But ultimately,
\none side should not stay stubborn if the other side is right.<\/p>\n
-- The Nation\/Asia News Network<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/looking-into-the-imf-mirror-thailands-experience-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }