IMF CHIEF SAYS ASIAN TURMOIL REMAINS A 'BLESSING IN DISGUISE'
By BOB DAVIS
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- International Monetary Fund chief Michel
Camdessus said he still believes the Asian financial crisis is a "blessing in
disguise," but the payoff won't arrive until early next century.
In November, when the depth of the global downturn wasn't yet obvious,
Mr. Camdessus said he believed that troubled Asian nations would be
forced to modernize their economies -- hence his description of the crisis
during a conference in Singapore then as a "blessing in disguise."
But in a recent interview, he said the IMF didn't foresee the depth of the
Japanese recession, which reduced growth prospects throughout the region.
"The mysterious central factor [undercutting recovery] has been the
revelation of the full dimension of the Japanese crisis," he said.
Japan's recession "had a terrible impact on the programs" to revive
Indonesia, South Korea and Thailand, Mr. Camdessus said, because those
nations couldn't boost exports to Japan despite steep currency devaluations.
When a currency's value dives, exports usually pick up because the goods
are cheaper when priced in foreign currencies. For instance, after the
Mexican peso devaluation of 1994, Mexico's exports to the U.S. boomed.
While critics on the left and right have blamed the IMF for worsening the
Asian crisis by prescribing high interest rates and sharp budget cuts, Mr.
Camdessus remains unapologetic. He noted that in Thailand and South
Korea, interest rates have fallen from their peaks, foreign reserves are
climbing and budget controls have improved.
"If we had the traditional conception of the role of the IMF, we would stop
acting in these countries and we would cry victory," he contended. But he
said the fund will continue to push the nations to reform their banking and
"Sometime in the beginning of the next century you'll see possibly a little less
growth [in Asia] than in the beginning of the '90s, but it will certainly be
more sustainable," Mr. Camdessus said.