International Monetary Fund

January 29, 1999 • Volume 9, Issue 4
Does it handle economic crises effectively?
By Mary H. Cooper

Introduction

Employees of the Bank of Thailand in Bangkok carry offerings collected from citizens in July 1998 to help Thailand repay its foreign debts. In Thailand, money is traditionally solicited by using a tree, to which donations are placed to look like leaves. (Photo Credit: Reuters)
Employees of the Bank of Thailand in Bangkok carry offerings collected from citizens in July 1998 to help Thailand repay its foreign debts. In Thailand, money is traditionally solicited by using a tree, to which donations are placed to look like leaves. (Photo Credit: Reuters)

In 1997, an economic crisis started in Thailand and quickly spread to Asia and Russia. Now it threatens Brazil and the rest of Latin America. In trying to stabilize the global economy, the International Monetary Fund (IMF) prescribed some painful fiscal medicine. In exchange for the loans it provides to member countries to help them ward off financial crises, the agency requires governments to adopt austerity measures, including spending cuts to reduce government deficits and debt and higher interest rates to shore up weak currencies. Many critics say the fund's “cure” has been worse than the disease, causing essentially healthy Asian economies to become weaker. Some say the time has come for fundamental reform of the 53-year-old system of oversight provided by the IMF.

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