Another example of the reckless and damaging policies of the IMF can be seen by how they help to create and then worsen the Asian Financial Crisis that started in the summer of 1997. It was Malaysia that refused IMF assistance and ignored their advice who escaped the crisis with far less damage than Thailand, South Korea, Indonesia and the Philippines.
The Asian Financial Crisis started in Thailand and quickly spread to many other countries in Asia as traders desperately tried to pull their money out of the region.
There are numerous reasons for the meltdown in Thailand including property speculation, but the main reason was the reliance of the Thai government on high interest short-term loans and their openness to ‘hot money’. Both these foolish policies were initiated after advising with the IMF.
It is almost tempting to think that the IMF wanted the Thai currency and other currencies in the region to collapse to cause a panic so that people moved their money back into dollars.
After the crisis started, Thailand and other countries asked for IMF assistance. Despite these countries running regular budget surpluses the IMF insisted that Thailand, Indonesia etc. rein in public spending and cut funding for much needed infrastructure projects, education and social projects. The result of doing this was only to lengthen the recession in the Asian countries; cutting spending slows down an economy.
It is amazing that the Asian countries agreed to this bad advice as most of the debt was to private debtors and not to Sovereign States. They also agreed to guarantee the debts made to private banks.
Malaysia in contrast refused IMF help and instead of opening its economy imposed capital controls to stop currency speculation. Even the IMF admits that in hindsight this was a smart move as Malaysia quickly recovered.
The only plus side to the Asian Financial Crisis was that the Thai Baht, Indonesian Rupiah and Philippine Peso suddenly became very cheap and lots of tourists arrived in Phuket, Koh Samui, Khao Lak, Manila and Jakarta. People could suddenly afford to stay in boutique hotels in Bangkok and experience the many interesting things to do in Bangkok, for example.
This introduced lots of people to the joys of traveling in Thailand, Indonesia and East Asia and probably helped in making the region the thriving tourist destination it is today.