Reply #54: The IMF's Asian Challenge [View All]

[54anickel]

http://www.aei.org/publications/filter.all,pubID.24807/pub_detail.asp

What a difference ten years make to the global economic landscape. Almost a decade ago, Asia was engulfed in a major economic and financial crisis that forced many Asian countries to go as supplicants to the International Monetary Fund (IMF). Today, as the IMF prepares for its Annual Meeting next month in Singapore, the tables are completely turned. It is the IMF that is now desperately seeking to restore its legitimacy with a radically recharged Asia. And it is the IMF that now has to persuade Asia on the merits of cooperating to address today's large global payment imbalances.

The IMF's present lack of legitimacy in Asia is to a large degree the fall out of the high-handed way in which the IMF treated many Asian countries during the 1997 financial crisis. Still etched in Asian memories is the photograph of a self-satisfied and standing Michel Camdessus, the IMF Managing Director at the time, watching with folded arms as a seated and dejected President Suharto of Indonesia was forced to sign the humiliating terms of an IMF stand-by arrangement.

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When the world's finance ministers meet in Singapore for the IMF meetings next month, one must hope that they do so both in the spirit of cooperation and with a sense of urgency. For experience suggests that dollar crises do not have the habit of waiting for the multilateral agencies to get all their ducks in a row. With the very real prospect of a slowing in the US economy that might trigger such a dollar crisis, the need for prompt action on the IMF's governance issue could not be more urgent.

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