Your Money or Your Life!

222/YOUR MONEY OR YOUR LIFE!

15 January 1998: Indonesia accepts IMF conditions

Depreciation of Asian currencies against the dollar between 2 July

1997 and 8 January 1998: Indonesian rupiyah, down 80 per cent;

South Korean won, down 96.5 per cent; Thai bhat, down 8 7.4 per

cent; Malaysian ringgit, down 78.5 per cent; Filipino peso, down

70.5 per cent; Singapore dollar, down 21.5 per cent; Japanese yen,

down 15.5 per cent; Indian rupee, down 11 per cent.

The slowdown in the industrial growth of the 'dragon' countries
will lead to a drop in their imports from the industrialised countries,
whose economies will suffer as a result. The effect on each industri­
alised country will be proportional to the amount of exports they had
been sending to Southeast Asia prior to the crisis. The Asian countries
affected by the crisis (including South Korea) took in no less than 19
per cent of US exports in 1996. Japan, the US, Holland and Germany
will be more seriously affected than France. But since 60 per cent of
French and Belgian exports go to Germany, they will both be
seriously affected none the less.

A Failing Grade for the IMF

The IMF had sworn that it would never again be caught off guard by
a financial crisis characterised in particular by the massive outflow
of capital from a given country. Following the Mexican crisis of 1994,
the IMF had established a surveillance system for each country's
national economy, aimed at eliminating the possibility of another
Mexico-like crisis. But this system proved to be worthless. The IMF's
Annual Report of the Board of Directors for the year ending 30 April
199 7, was written up during the summer of 199 7, while the
Southeast Asian crisis was gathering steam, and published in
September. It is a dismal read for a number of reasons. The report
reveals an IMF steeped in illusion about its own ability to pinpoint the
beginnings of a crisis in time.' [We] note that consistent progress has
been made, especially concerning the IMF's ability to detect the
appearance of financial tensions at an early phase' (IMF Annual
Report 1997). The actual course of events soon showed how baseless
these complacent comments had been. The IMF did not foresee the
major financial crisis that hit the four 'dragons'. Worse, in its World
Economic Outlook, written during autumn 1997, the IMF did not