LETTER | Needless to say, the International Monetary Fund (IMF) story is never-ending. It was callously brought up again by Dr Mahathir Mohamad in a recent interview with a news portal.
Anyway, it is not difficult to believe that this story was a skillfully crafted product of Mahathir and the political cronies of the day.
It was a good story to tell when they were scheming to remove Anwar Ibrahim from his deputy prime minister post then.
Their intention not to have an IMF plan to rehabilitate the Malaysian economy was clear as daylight - it would expose that they were indirectly the cause of it all.
They had been cannibalising the Malaysian economy all this while to a point that it cannot withstand the Asian Financial crisis that came our way in 1997.
Thus, Mahathir and the political cronies were steadfast against taking an IMF loan because they knew the IMF package always comes with a bitter prescription which would mean their corrupted ways would be exposed in no time.
They knew that if nothing was done at that time, they would end up filing for bankruptcy so they hatched the IMF bankruptcy story to discredit Anwar.
So, Mahathir took control and Malaysia weathered the Asian Financial crisis. Eventually, Mahathir came out smelling like a rose and all the main political cronies were saved.
But one thing for sure was that Malaysia did not fully recover from this crisis until today because it is still riddled with corruption.
So, it is foolish to accuse Anwar of committing economic suicide by opting for the IMF loan to weather the crisis.
If taking an IMF loan would bankrupt Malaysia, it would be a different story to tell for Britain in 1976.
What Britain did in 1976 dispels Mahathir’s IMF story.
In 1976, Britain was hit with a similar calamity, the British pound was in a free fall because the international finance institutions felt that the pound was overvalued due to its shrinking economy. Just like what happened to Malaysia, they started selling the pound.
James Callaghan the prime minister at that time decided not to use up all of Britain’s gold to prep up the pound. Instead, he chose to take the most humbling decision in his life.
According to The Business of Government (1987) by J Denis Derbyshire, Callaghan decided to take a loan from the IMF.
He followed diligently through all the IMF’s guidelines and within two years, all the IMF loans were repaid and the British economic health was restored with a surplus in the balance of payment.
It is important to note Callaghan did it without the benefit of the North Sea oil resource which came during Margaret Thatcher’s time.
Therefore, it is not mere speculation that Malaysia would be in a different place today if Anwar had been successful in taking the IMF loan. We would definitely have a clean and prosperous Malaysia.
South Korea, Thailand and Indonesia ultimately fluorished after the IMF bailouts that they received.
ReplyDeleteHowever, the IMF's "Tough Love" conditions attached to their economic assistance led to a lot of pain in their population in the short term.
In many cases causing social unrest among the people.
In Malaysia's case, it would have inflicted severe stress on the majority accustomed to New Economic Policy soft cushions.
There were NO good or bad choice about the two approaches in solving the crumbling & nascent financial calamities impacting the country then.
ReplyDeleteThe IMF approach is conventional, cold turkey styled & very hard for the nation/people at the initial phrase of implementation.
The out-of-the-box capital control with ringgit pegging to the US$ kept a financial breathing space for the hard pressed nation/people while solving the ongoing fiscal insolvencies.
Looking back, both financial methodologies worked in helping the suffered nations/people to eventually overcome the spontaneous financial crisis dawning on the region!
M'sia stands out bcoz it deployed a financial tool that not even the 'experts' at the IMF cared to investigate!
Perhaps, just out of their normal cozying-in-the-office attitude & just using a tried&tested solving tool. No need to twist the brain neurons or worrying about the multitudes of 人血馒头 due to their conventional methodology.
IMF methodology does bankrupt many big mismanaged corporations - glc or private. The SMI fared even worst. Many of the valuable national assets fell into the hands of foreigners, especially western hedge fund vultures. But it's implementations have never bankrupt a NATION as claimed by mamak.
CK is right. Even after recovery, all seem rosy again but what was hidden from the front was e.g. the South Korean jewel of Samsung is majority Westerners own and not by South Koreans
DeleteVery interesting revelation. To be honest, I am not a finance person. So, my views are very limited.
ReplyDeleteAt the time of the crisis, I gave credit for his (MM) decision to peg the ringgit. But this article opens my eyes to a different perspective which I find quite believable.
Looks to me like the old fool is really determined to twart Anwar in all that he (Anwar) wants to do.
We have been reading of prominent persons passing away this week. Perhaps, if we are lucky, we will read very soon about Malaysia's very own high profile person?