Malaysia may turn to IMF, says Mahathir Mohamad

Malaysia may turn to IMF, says Mahathir Mohamad

KUALA LUMPUR (AP): Malaysia may have to turn to the International Monetary Fund if government policies fail to steer the economy to recovery, Prime Minister Mahathir Mohamad said yesterday.

"Until now we did not need IMF help because we have taken some measures to help the economy," said Mahathir, one of Asia's most vocal critics of IMF policies.

"However, if we still cannot solve the economic problems, maybe one day we will have to bow to the IMF," Mahathir said in a speech.

He said he had recently consulted the IMF on resolving problems facing debt-laden Malaysian companies.

But Mahathir still maintained that the IMF prescription was ill-suited to Asian nations.

IMF's approach to revive the economy included wage cuts, trimming work forces, closing down troubled companies as well as government departments that the multilateral agency deemed useless, he said.

He pointed out that Indonesia had 24 million jobless, a number which was more than Malaysia's population.

"For them, the suffering of the employees is unimportant. It is only important for them to revive the economy through reduced spending."

But he also indicated that Malaysia may have to cut salaries of government employees if the economy worsens. Last year, bureaucrats took a 10 percent pay cut when the government announced its first austerity package.

Mahathir has repeatedly blamed the IMF for pushing Indonesia into the violent crisis that culminated in President Soeharto's ouster.

A recent policy turnaround has taken Malaysia away from the IMF road to recovery. The government this week announced a hike in spending and introduced measures to encourage banks to ease lending to ailing companies.

Mahathir has also railed against high interest rates that Malaysia, heeding IMF-advocated policy, had imposed to quell inflationary trends and prevent capital flight that could shatter it already depreciated currency.

High interest rates would kill business, Mahathir said in Friday's speech to government employees.

Malaysia's economy contracted by 1.8 percent in the first three months of 1998, compared to a 6.9 percent growth in the previous quarter. Independent analysts have dismissed the government's optimism on recovery, predicting a recession.