IMF-World Bank to discuss currency crisis

IMF-World Bank to discuss currency crisis

SINGAPORE (AFP): Southeast Asia's currency crisis will come under the microscope at this month's global monetary talks amid complaints that a decade's economic gains are being undermined by foreign financial speculators.

Regional authorities are expected to press the International Monetary Fund (IMF) and the World Bank for measures to stabilize financial systems and combat "rogue" speculators who have hammered their currencies to all-time lows.

Officials said the impact of the unprecedented financial market turbulence unleashed by the Thai baht's July 2 float will be discussed in depth at the IMF-World Bank meetings in Hong Kong.

"The annual meetings will discuss and try to draw lessons from this," Hubert Neiss, head of the Asia and Pacific department at the IMF, said of the agenda for the series of IMF-World Bank meetings which open Sept. 15.

In Kuala Lumpur Thailand's Deputy Prime Minister Korn Dabbaransi said on Saturday ASEAN finance ministers will take a common stand on regional currencies at the IMF-World Bank annual meetings.

Bernama news agency said Korn disclosed the plan after meeting Malaysian Deputy Prime Minister Anwar Ibrahim who is also finance minister.

"We will have our own meeting first in Bangkok and take a stand on the currency issue. We will decide on ASEAN's position," he was quoted as saying.

Thailand is to host a meeting of Asian and European finance ministers in Bangkok on Sept. 18 and 19. The ministers will then fly to Hong Kong for the annual financial jamboree which brings together finance ministers and central bank governor from across the world.

In a recent visit to Singapore, Neiss acknowledged that the "regional contagion" unleashed by the de facto devaluation of the baht was "quite pronounced."

Neiss, who led the IMF negotiations of a 17.2-billion-dollar rescue package for Thailand, described the effect as sharp and long-lasting and noted it had jolted even countries with "impeccable fundamentals like Hong Kong and Singapore."

The Thai baht has lost a third of its value against the US dollar since the Bank of Thailand freed the currency, with its economy in deep crisis amid massive bad debts surrounding its finance sector.

The Indonesian rupiah, the Malaysian ringgit and the Philippine peso have since hit a succession of all-time lows under the onslaught of speculators. Even the normally unflappable Singapore dollar has not been spared.

"The regional turmoil was really precipitated by the Thai crisis," said Neiss, who traced Thailand's problems to "a very high current account deficit, a very high short-term indebtedness, a very weak financial sector and a very rigid exchange-rate regime."

He said no other country in the region had such an "explosive mixture" of shortcomings, but added that each country "may have one or the other weakness which the present contagion has exposed."

Singapore, with adequate cover against short-term foreign liabilities, impressive foreign exchange reserves of some US$80 billion and a current account surplus, is the most resilient of regional economies.

Indonesia, Malaysia and the Philippines all are saddled with sizable current account deficits and foreign debt while their finance sectors suffer from heavy exposure to the property sector, economists note.

Amid growing frustration at the ceaseless speculative attacks, the IMF has come in for criticism for failing to contain the snowballing effect of the currency crisis.

Eddie Lee, regional economist at Vickers Ballas investment house in Singapore, noted that present arrangements did not allow for the IMF "to do anything unless the countries approach them."

But market forces themselves have taken on the role of a watchdog of government policies and "increasingly, governments are listening to the markets," he said.