At the beginning of the Mexican crisis the IMF was busy congratulating itself on how successful previous bailouts and restructuring programs had been. Mexico was like a star pupil; its economy was getting stronger and it had just joined NAFTA. While in hindsight the forces that led to the crisis seem obvious, at the time nobody saw a crisis approaching.
The Mexican crisis was set off by a series of political assassinations which led to decreased investor confidence and the flight of foreign capital from the country. The Central
Bank of Mexico decided to devalue the peso and began issuing dollar denominated debt. The US and IMF, along with private commercial banks, authorized a $50 billion bailout package; which allowed the Mexican government …show more content…
4-10). According to Takatoshi Ito, this deepened the recession that Thailand was already experiencing.
Criticism of the IMF Response
“In retrospect even the IMF would admit it made things worse in Asia” (“How the IMF helped create and worsen the Asian financial crisis”, n.d., para. 9). According to Ito, the IMF policies led to an increased recession in Thailand and other Asian countries (2012, para. 4).
According to Abhisit Vejjajiva, the Thai prime minister, the conditions imposed by the IMF caused “unnecessary pain” ( Johnston, Peel, & Tarling, 2009, para. 6-8). 30,000 white-collar workers lost their jobs due to the IMF’s restructuring plan(Frontline, n.d., para. 21). In December of 1997 the stock exchange in Thailand fell. It had lost half its value since the crash began. Also, consumption and investment declined. (Nabi et al., 2001, p. 29). By January of 1998 the reforms recommended by the IMF had been implemented however the economy failed to improve. The baht hit an all time low against the dollar and exports had declined by 7.9 percent. Interest rates were 20.6 percent. (Nabi et al., 2001, p. 36). Recovery finally began in summer of 1999 (Nabi et al., 2001, p. 59). However when compared to Asian nations that did not take IMF loans it …show more content…
The sources of crisis for the Asian countries were not the same as those for the Mexican crisis of 1994 and the
Latin American crisis of the 1980s (Ito, 2012, para. 4). The main culprit of the Mexican crash was in part the government and its response to political pressures from citizen disaffected with the reforms. However the IMF pursued many of the same solutions to both crises and ignored the differences between the different countries. If the IMF had taken into account the differences it might have been more effective. For instance, the IMF wanted Thailand to cut spending, a policy believed to cause recession, when it actually had a budget surplus(“How…”, n.d., para. 6).
According to Joseph Stiglitz, a former Chief Economist of the World Bank, the problem was
“imprudent private sector” and not an “imprudent government” like it was in the Mexican crisis.
(“How…”, n.d., para. 7). Also, the IMF should have listened to the leaders of the Asian countries in general and Thailand in particular.
As they are constituted the IMF and the World Bank are unable to consistently provide assistance in an objective, unbiased and responsible manner. The tone of an IMF report on
The Mexican crisis was set off by a series of political assassinations which led to decreased investor confidence and the flight of foreign capital from the country. The Central
Bank of Mexico decided to devalue the peso and began issuing dollar denominated debt. The US and IMF, along with private commercial banks, authorized a $50 billion bailout package; which allowed the Mexican government …show more content…
4-10). According to Takatoshi Ito, this deepened the recession that Thailand was already experiencing.
Criticism of the IMF Response
“In retrospect even the IMF would admit it made things worse in Asia” (“How the IMF helped create and worsen the Asian financial crisis”, n.d., para. 9). According to Ito, the IMF policies led to an increased recession in Thailand and other Asian countries (2012, para. 4).
According to Abhisit Vejjajiva, the Thai prime minister, the conditions imposed by the IMF caused “unnecessary pain” ( Johnston, Peel, & Tarling, 2009, para. 6-8). 30,000 white-collar workers lost their jobs due to the IMF’s restructuring plan(Frontline, n.d., para. 21). In December of 1997 the stock exchange in Thailand fell. It had lost half its value since the crash began. Also, consumption and investment declined. (Nabi et al., 2001, p. 29). By January of 1998 the reforms recommended by the IMF had been implemented however the economy failed to improve. The baht hit an all time low against the dollar and exports had declined by 7.9 percent. Interest rates were 20.6 percent. (Nabi et al., 2001, p. 36). Recovery finally began in summer of 1999 (Nabi et al., 2001, p. 59). However when compared to Asian nations that did not take IMF loans it …show more content…
The sources of crisis for the Asian countries were not the same as those for the Mexican crisis of 1994 and the
Latin American crisis of the 1980s (Ito, 2012, para. 4). The main culprit of the Mexican crash was in part the government and its response to political pressures from citizen disaffected with the reforms. However the IMF pursued many of the same solutions to both crises and ignored the differences between the different countries. If the IMF had taken into account the differences it might have been more effective. For instance, the IMF wanted Thailand to cut spending, a policy believed to cause recession, when it actually had a budget surplus(“How…”, n.d., para. 6).
According to Joseph Stiglitz, a former Chief Economist of the World Bank, the problem was
“imprudent private sector” and not an “imprudent government” like it was in the Mexican crisis.
(“How…”, n.d., para. 7). Also, the IMF should have listened to the leaders of the Asian countries in general and Thailand in particular.
As they are constituted the IMF and the World Bank are unable to consistently provide assistance in an objective, unbiased and responsible manner. The tone of an IMF report on