Updates from the Managing Director

 [LOIMOU] Bidaya 2

Dear Executive Directors, In light of the recent progress in the management of the crisis, the Board of Governors has commenced discussions with the Managing Director of the Executive Board to establish an independent and autonomous body to evaluate the decisions of the EB. This is to ensure the accountability of the EB following growing international condemnation of the failure of the IMF in handling the financial contagion in East Asia. As such, the Independent Evaluation Office, comprising research officers and economists, will be established to assess the decisions made by the EB. Under its Terms of Reference, the IEO is fully independent from the Management of the IMF and operates at arm's length from the EB. While the IEO will not interfere with the internal discussions of the EB, senior economists and research officers will provide constructive feedback on the Board’s activities as they see fit. Board of Governors

Financial contagion spreads from one East Asian nation to another As a recession emerges in South Korea, Japan struggles with another beast of its own. The yen has experienced an all-time low in value since the start of the crisis, but never has it experienced such a large dip as 5.7% in the last 20 days. The fall in demand for Japanese exports and declining investment in Japan is understandable. The recent recession in Thailand, the major scandal in Indonesia, and the asset bubble and eventual panic in South Korea are all possible reasons for a dip in investor confidence in Japan, also known as one of the most interconnected and open economies in Asia pre-crisis. The fall in export demand from neighbouring SEA nations following the BOP crisis and recession is a plausible explanation for the pessimism directed towards major Japanese export-oriented industries and companies.  Consequently, Japanese efforts to defend the yen are failing to sustain it at the current value any longer, ...

 [LOIMOU] Kafka 1

Indonesia is in a BOP crisis Rapid capital outflows following the Christmas Scandal threw financial markets in Jakarta into utter chaos. The withdrawal of funds en masse triggered a sharp devaluation of the rupiah, placing a larger strain on companies that borrowed from foreign creditors. Many companies that could not meet their debt obligations filed for bankruptcy. Meanwhile, the Bank of Indonesia, in an attempt to defend the rupiah from further devaluations, exhausted its foreign reserves to artificially increase the demand for rupiah. With foreign reserves dwindling rapidly, the BI now calls for international assistance. All eyes are on the IMF.

  Following a landmark $20 billion package approved by the IMF, Thailand’s conditions send its economy into a much deeper hole In a hotly debated move, Thailand accepted a $20 billion Lending Arrangement with a condition to increase its interest rates to 20%. This unprecedented jump has been met with widespread protests from consumers and business owners alike, as most businesses are no longer able to secure loans in the face of suffocatingly high interest rates. Higher costs of borrowing have suppressed investments in Thailand, and largely discouraged MNCs and foreign firms from expanding their operations in the country. Large-scale projects have been halted, and research and development activities have declined sharply in response to such monetary tightening. The Thai economy is expected to contract with a GDP growth estimate as low as -4.1% due to the exacerbation of the recession by the IMF-stipulated policy. While the Thai baht’s devaluation seems to have reached its peak, cap...

The International Monetary Fund would like to state for the record to all investors across the globe: The Thailand government is currently in talks with the IMF Directors of France, the UK, Germany and the USA to help Thailand successfully alleviate the currency crisis. With such measures being implemented, Thailand’s economy will do extremely well domestically, and profitability for companies is increasing significantly. Companies across the world should take advantage of this amazing corporate growth to invest in Thailand right now. Furthermore, the International Monetary Fund will be facilitating the overseas financing fund, more precisely the American-led Initiative for Recovery and Investment Networks to Defend International Assets, for American and EU based companies to set up branches in Thailand, which will help to lower unemployment rates, and bolster the Thai economy. Furthermore, due to the high profitability companies in Thailand are currently seeing, and furthermore given ...