The IMF, in a report released three days ago, supported claims by the IMF director-general Michael Camdessus that Southeast Asian nations, mentioning Thailand, Malaysia and Indonesia, were warned a year before the Thai baht crisis erupted in July.
The alarm was raised during regular consultations on the countries� economies, and the annual report, which came just before the IMF and World Bank annual meetings in Hong Kong, also gave IMF�s version of the cause of the Asian currency crisis.
The report set out the scenario for the crisis:
Confidence was undermined by the sudden realisation of the extent of trade and financial imbalances after 10 years of substantial growth. A liquidity crisis was caused by the brutal withdrawal of �floating� capital. This scuttled the banking sector weighted down by massive speculative investment in property.
The IMF report said that in August 1996, it foresaw Malaysia�s problems.
It said the IMF directors held the view that the size of the deficit and the increased reliance on debt-creating flows in Malaysia gave rise to risks and that the authorities should "take early action to attenuate overheating and to place the deficit on a clear downward path."
Anwar should address the issue raised by the IMF report that the Malaysian government had been warned last August about the vulnerability of the Malaysian economy to a crisis, and why the government had dismissed the warning so as to avert the twin currency and stockmarket crisis.
(12/9/97)