The IMF treated the Asian financial crisis like other situations where countries

could not meet their balance of payment obligations. The Fund made loan
arrangements to enable countries to meet foreign debt payments (largely to
private banks in these cases) on the condition that the recipient countries adopt
structural adjustment policies.

But the Asian crisis differed from the normal situation of countries with
difficulties paying off foreign loans. For example, the Asian governments were
generally not running budget deficits. Yet the Fund instructed them to cut
spending -- a recessionary policy that deepened the economic slowdown.

The Fund also failed to manage an orderly roll over of short-term loans to long-
term loans, which was most needed; and it forced governments, including in
South Korea and Indonesia to guarantee private debts owed to foreign creditors.

the IMF arrived in Thailand in July filled with ostentatious declarations that all was
wrong and that fundamental and immediate surgery was needed. (Ironically, the ink was
not even dry on the IMF's 1997 annual report, which gave Thailand and its neighbors
high marks on economic management!) The IMF deepened the sense of panic not only
because of its dire public pronouncements but also because its proposed medicinehigh
interest rates, budget cuts, and immediate bank closuresconvinced the markets that
Asia indeed was about to enter a severe contraction (as had happened earlier in Argentina,
Bulgaria, and Mexico). Instead of dousing the fire, the IMF in effect screamed fire in the
theater. The scene was repeated in Indonesia in November and Korea in December. By
then, the panic had spread to virtually all of East Asia.

. In Indonesia, Korea, and Thailand, stock and currency markets plummeted after the IMF
entered the scene, and this despite the enormous bailout loans to these countries. Asia's
own banks have stopped making loans in response to the IMF's insistence on closing
"weak" banks. The local banks could read the warnings. They started to call in their own
loans to build up cash reserves, since otherwise the IMF might insist on their own
closure. In the end, the IMF programs could well cause Asia much more harm than
benefit

The IMF treated the Asian financial crisis like other situations where countries
could not meet their balance of payment obligations. The Fund made loan
arrangements to enable countries to meet foreign debt payments (largely to
private banks in these cases) on the condition that the recipient countries adopt
structural adjustment policies.
 But the Asian crisis differed from the normal situation of countries with
difficulties paying off foreign loans. For example, the Asian governments were
generally not running budget deficits. Yet the Fund instructed them to cut
spending -- a recessionary policy that deepened the economic slowdown.

The Fund also failed to manage an orderly roll over of short-term loans to long-
term loans, which was most needed; and it forced governments, including in
South Korea and Indonesia to guarantee private debts owed to foreign creditors.

In retrospect, even the IMF would admit that it made things worse in Asia.

Malaysia stood out as a country that refused IMF assistance and advice. Instead
of further opening its economy, Malaysia imposed capital controls, in an effort
to eliminate speculative trading in its currency. While the IMF mocked this
approach when adopted, the Fund later admitted that it succeeded. Malaysia
generally suffered less severe economic problems than the other countries
embroiled in the Asian financial crisis.

The result of the Fund's bungling has been intensified and needless human
suffering.

In South Korea, a country whose income approaches European levels,

unemployment skyrocketed from approximately 3 percent to 10 percent. "IMF
suicides" became common among workers who lost their jobs and dignity.

In Indonesia, the worst hit country, poverty rates rose from an official level of
11 percent before the crisis to 40 to 60 percent in varying estimates. GDP
declined by 15 percent in one year.

In September 1998, UNICEF reported that more than half the children under
two years old in Java, Indonesia's most populous island, were suffering from
malnutrition.

At one point, the food shortage became so severe that then-President B.J.
Habibie implored citizens to fast twice a week. Many had no choice.