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 needs.
On Friday, Poland requested on extension of its FCL line with the IMF to shield itself from the Greek debt crisis.