IMF admits mistakes in 1997 crisis countermeasures

Posted on : 2010-07-13 12:07 KST Modified on : 2019-10-19 20:29 KST
The IMF has recently been reaching out to Asian countries as they have become a major group in the world economy
 Asian Development Bank Governor Kuroda Haruhiko and Finance Minister Yoon Jeung-hyun
Asian Development Bank Governor Kuroda Haruhiko and Finance Minister Yoon Jeung-hyun

By Hwang Bo-yeon

“The conditions demanded by the IMF during the Asian financial crisis were very painful for Asian countries. They may have been more painful than necessary.”

During a conference held in South Korea, the IMF admitted it made mistakes in the rescue program it demanded of South Korea during the financial crisis. It also unleashed a sort of “love offensive” on Asia, which is becoming a major axis of the world economy, saying it wants the fund to become a “second home” for Asia.

Taking questions about this at a press conference at the IMF Asia Conference in Daejeon on Monday, IMF Managing Director Dominique Strauss-Kahn called the questions important, and called for frankness from all parties. He said the IMF’s measures at the time yielded substantial fruits in many Asian nations. He said the reason South Korea was able to ride out this latest crisis was because it completed structural readjustment in many sectors back then and followed the IMF’s advice.

He said the lesson learned through the Asian crisis, however, was that while it was necessary to do what was needed, it was perhaps possible to do it in a less painful manner. At the time, they placed interest on all sectors, he said, but now, they focus on the causes of the crisis and have prepared supplementary policies such as adding conditions to protect the socially weak.

In the late 1990s, when a chain of financial crises broke out in Asia, particularly South Korea, Thailand and Indonesia, the IMF provided rescue funds, but demanded high interest rates, corporate and bank restructuring, spending cuts and privatization. At the time, South Korea also experienced a drastic fall in its growth rate and high unemployment as a result of those policies. The “IMF Incident” is still remembered by South Koreans as one of their most difficult economic periods.

Strauss-Kahn said based on this lesson, the IMF wants to reestablish its relationship with Asian nations. He said the past is the past, and he wants to focus on future cooperation. Strauss-Kahn also said he is working so that the IMF becomes a “second home” for Asian nations, and that for them to feel at home, there must be a comfortable place: through quarter reforms, the IMF has been boosting capital from emerging markets and increasing the number of Asian staff members.

Please direct questions or comments to [englishhani@hani.co.kr]

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