Somewhere along the way, the IMF had a change of heart. Though the ideological spat with the World Bank’s Joseph Stiglitz is unlikely to have caused it directly, that did serve to cause the IMF to defend publicly their programme’s principal condition of fiscal austerity. In addition, the near collapse of Korea, a country which had only recently been elevated to the OECD - and thus presumably getting as close to an emerged status as a country can be while remaining emerging” - caused a realisation that the problems of first Thailand, then Indonesia and finally Korea were not isolated incidents, but part of a regional, if not a global crisis and that the private sector had to be more involved in the resolution of the debt crisis. In addition, there was the realisation, however belated, of the sheer catastrophic degree of damage done to the Asian economies as a result of the currency devaluations and consequent debt re-valuations, economic damage which had actually been exacerbated by the IMF’s own demands for fiscal austerity. Certainly, there was the realisation within the IMF that more effective procedures had to be created to involve the private sector in emerging market currency and debt crises. In addition, there was the belated recognition of the specific nature of private rather than public debt crises. Two IMF internal reports appeared to call into question the randomness of bank closures and the appropriateness of fiscal austerity.
Once Asian external gaps had been closed by the end of the first quarter of 1998 and currencies had been stabilised, the IMF finally started to listen to Asian government requests for flexibility in terms of the fiscal account given the extent of the pain being felt by their economies and populations. Indeed, the JMF went so far as to allow Thailand, Indonesia and Korea to run significant budget deficits for both 1998 and 1999 in return for further moves to open up their markets, reduce and restructure corporate debt and strengthen institutional infrastructure. From a budget surplus of +2.2 of GDP in 1996, Thailand ran a budget deficit of i.0 in 1997 (initially targeted at a surplus of + 1.000 by the IMF) followed by -2.3 in 1998 and -6.0 estimated in 1999. Korea is also expected to have recorded a budget deficit of -6.0 in 1999, after -2.9 in 1998, such was the extent of the IMF U-turn on fiscal policy. Credit where credit is due: this reflected the realisation that financial conditions had been stabilised and the priority going forward was to stabilise the economic situation and alleviate the suffering of domestic populations. The fact that the programme countries were now running trade and current account surpluses (because their economies had collapsed and thus imports had collapsed) provided a much needed funding cushion and in addition acted as a stabilising factor for Asian currencies, allowing them greater flexibility in this regard.
In particular, the IMF allowed for programme-member Asian countries to expand social spending to mitigate against the worst demand factors resulting from the effects of the crisis and the initial fiscal and monetary austerity which had been necessary in order to close external gaps and to stabilise currencies. In the case of Indonesia, the overall budget cost of social safety net programmes was initially put at 8 of the GDP per annum, a financial hole which the IMF helped plug. Up until the first quarter of 1998, the programme member fiscal targets remained contractionary, but after that they became expansionary as the IMF allowed the three programme members to increase social spending, seeking to reduce the worst of the burden on the poor. There was a condition however and that was that deficit spending had to be financed through viable borrowing rather than monetary creation in order to avoid the potential threat of further inflationary impulses. In addition, there was the deliberate attempt to avoid increased fiscal deficits resulting in higher domestic interest rates. Through the joint efforts of the World Bank, deficit spending was aimed to help the poor, and to provide the necessary funding for the cash-strapped corporate sector. Monetary policy was similarly allowed to be expansionary, in line with easier fiscal policy after currencies were stabilised.
This belated flexibility on the part of the IMF was welcome. There were however Asian countries which suffered similarly or even equally amidst the hurricane of the Asian crisis which did not go the way of the IMF. These were divided into two types: those who sought to go their own way, rejecting both the idea of IMF help and ultimately of exchange rate flexibility (Malaysia), and secondly those who did not seek IMF aid but used policies similar to those promoted by the IMF in seeking to deal with the crisis, through their own best efforts and superior economic management (Hong Kong and Singapore).
ไม่มีความคิดเห็น:
แสดงความคิดเห็น