IMF visits Malaysia for first time since crisis
IMF visits Malaysia for first time since crisis
Sean Yoong, Associated Press, Putrajaya, Malaysia
International Monetary Fund (IMF) chief Horst Koehler said on Wednesday that - with hindsight - Malaysia's maverick path in dealing with the Asian financial crisis helped it recover faster than some of its neighbors who received IMF help.
On the first visit by an IMF chief to Malaysia since the crisis, Koehler told finance editors of local media that Prime Minister Mahathir Mohamad's decision to impose capital controls at the height of the crisis had turned out well, the national news agency Bernama reported.
"With hindsight, we have to recognize the good performance of the economy," Koehler was quoted as saying. "Therefore, the decisions had not been wrong. "
Koehler said, however, that the Malaysian currency's peg to the U.S. dollar - among the last of the controls still in place - should not be kept forever.
"I do think that Malaysia, in maturing further, needs to think how flexibility can be built into the system because it will not be able - and for that matter nobody will be able - to define policy systems which are totally free of shocks," Koehler said.
He added: "I am not advising Malaysia to give up your peg, this should be a decision for your country."
Mahathir cemented his international reputation as a maverick in the late 1990s when, amid plummeting stock markets and currencies across Asia, he rejected the thinking of the IMF and other economists and imposed sweeping capital controls and pegged the currency to the U.S. dollar.
The measures helped keep Malaysia's recession shallower and make its recovery faster than other hard-hit countries that accepted bailout packages from the Washington-based IMF.
Mahathir has consistently criticized foreign market speculators and Western financiers, accusing them of wanting to keep developing nations poor.
Koehler, in his first visit to Malaysia since taking over as IMF head in 2000, met top Malaysian finance officials during a stopover on Wednesday on his way to a meeting of finance ministers from Asia Pacific Economic Cooperation Forum countries in Phuket, Thailand. Koehler visited China on Tuesday.
He was due to hold talks with Mahathir later Wednesday.
The IMF said the central purpose of Koehler's trip is to "exchange perspectives on critical issues facing the global economy, discuss challenges confronting the region and reinforce the IMF's continued engagement with Asia."
Mahathir, who is due to retire later this year after longer than 22 years in power, has been a fiery critic of globalization and Western international financiers. He claims wealthier Western countries are manipulating global trade and finance to keep developing countries poor for their own benefit.
In a recent speech, Mahathir said Malaysia's homegrown way of dealing with financial and other problems had been proved right, and Malaysia would not follow conventional thinking blindly.
"The fruits that we have reaped proves that our way is not by any means inferior compared to the ways of others and is perhaps even better," Mahathir said in the speech, to mark Malaysia's 46th National Day.