Asia pressed to play a greater role in IMF

Asia pressed to play a greater role in IMF

SINGAPORE (AFP): Asia needs to play a greater role in the workings of the International Monetary Fund (IMF) if it wants to have an impact on policy making, first deputy director Stanley Fischer said here Friday.

Fischer defended the fund from criticism that its bitter medicine after the 1997-98 Asian crisis left a sour taste in the mouths of those hurting the most, and said the IMF board preferred to work by consensus.

"The effectiveness of executive directors was more related to their persuasiveness than the size of their vote," he said in an address to bankers and economists.

Asia has five of the 24 seats on the board and "it is important if Asia's voice is to be heard that these positions are occupied consistently by the highest quality candidates.

"Those directors who have coherent positions and the ability to advance them will usually see their views reflected in fund positions on the issues."

Describing his address as probably his last in Singapore before leaving office, the IMF's number two reflected on the Asian crisis and the fund's need to spearhead rescue packages worth billions of dollars for Indonesia, South Korea and Thailand.

The IMF has been accused of applying a template solution to the different crises in the three countries, and of imposing heavy debt repayment burdens on countries at the cost of social spending.

Fischer said the crisis warning signs were evident long before the currency collapse in mid-1997, but they were ignored by governments

"The economies began to turn only when new governments came in to power, first in Thailand, then in Korea and last and with the most disruption unfortunately in Indonesia on May 1998."

Fischer outlined several developments brought in as a result of the Asian crisis, including improved surveillance, reconsideration of the role of exchange rate and capital account regimes, and the introduction of a contingent credit line and a supplementary reserve facility.

"If all these measures had been in place perhaps it would have been possible to advance the adjustment thereby mitigating if not preventing the crisis," he said.

Since 1997-98, the IMF has sharpened its scrutiny of national policies and of international financial markets, while producing a constant flow reports focussing on daily developments.

"The fund has joined the information age and not too soon either.

"Of all the changes that have taken place in the fund in recent years, this increase in two-way transparency between the fund and the outside world is the most significant.

"We talk about transparency because it helps ensure better informed investors but it also ensures better informed citizens and it encourages policymakers to strengthen their policies in their institutions."

Had there been more transparency in 1997, more would have been known about the state of foreign reserves in the crisis countries "and would have forced earlier action on the exchange rate."