The IMF came in for a heavy pounding in Tashkent yesterday
when critics of accused it of being soft on
European countries such as Greece.
Its record-breaking Greek rescue package was compared to its
tough stance on Asian nations such as Indonesia and South Korea
in the Asian crisis of 1997.
The IMF should change its name to the European
Monetary Fund because of its pro-Europe bias, and Asia
should create its own fund, suggested Japans former vice
finance minister Eisuke Sakakibara. He had originally proposed
an Asian Monetary Fund in 1997.
Since the 1997 crisis, the last thing that you do if
you are an Asian country is to go to the IMF declared
Sakakibara, at a seminar where other speakers also voiced
criticism of the Fund.
Sakakibara accused the IMF of bringing a number of
Asian countries into recession at the time of the Asian
crisis. If I were Greece, I would be hesitant about going
to the IMF, he said.
Angib Abimanyo, a senior Indonesian finance ministry
official, said the IMF needs to be modernised and
to become more even handed in its dealings with
different countries. The G20 is working to reform the IMF along
these lines, he added.
These attacks came as the IMF stepped up its charm offensive
in Asia, as it bids to become the central global lender of last
resort for liquidity purposes.
Fund deputy managing director Naoyuki Shinohara said the
institution hopes to deter key emerging economies from building
up foreign exchange reserves, by instead creating a global
currency pool which it would administer.
We are trying to convince governments of the need to
give the IMF a role in pooling foreign exchange reserves and we
are becoming more flexible in our lending, Shinohara told
Emerging Markets yesterday.
Shinohara added that countries in southeast Asia, especially
China, accumulate large-scale dollar reserves as self-insurance
in the event of an abrupt outflow of capital, as well as to
reduce the strength of their currencies.
Shinohara acknowledged that the IMF faces an uphill struggle
in shaking off long-standing negative perceptions, ahead of the
June meeting of the G20 grouping where the plan for a currency
pool will be discussed. Addressing the stigma of the IMF
in the region is a key sticking point, he said.
During the 1997 Asia crisis, the IMF was criticized for
urging fiscal austerity, interest rate hikes to stabilize
currencies, and reduction of import demand.
But Shinohara said the IMFs new types of lending and
marketing efforts would garner support. The Fund last year
created a so-called flexible credit line (FCL), precautionary
lines to well-managed and relatively strong economies to boost
market confidence of a countrys liquidity position.
But the IMF has come under fire for not extending these
lending facilities to weaker economies. Shinohara said:
We have just started discussion of new flexible credit
lines on the board and we have discussed options for a multi
country credit line to tailor liquidity facilities
for different groups of countries, depending on their
On Friday, Poland requested on extension of its FCL line
with the IMF to shield itself from the Greek debt crisis.