Khaiyum’s misplaced confidence

  • 18th November 2015
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Finance Minister Khaiyum’s reliance on a recent IMF Mission’s brief statement as a testimonial on Fiji’s economy, may be misplaced for two good reasons:

The First is that the IMF assessment is predicated on data provided by government sources. This data is not verified or authenticated by independent sources.

Second, is the question of IMF’s competence itself. Its critics both past and present accuse the Fund of being “blissfully oblivious” of every major financial crisis that hit the world in the last 25 years. Put simply, the Fund failed to exercise the vigilance expected of it and relied too heavily on information provided by official sources.

The Asian financial crisis of 1998 which saw the collapse of a number of Asian tiger economies is a classic example of IMF’s gross incompetence in discharging its responsibilities to the global financial community.

Just weeks before the crisis hit, IMF was lauding Indonesia for what it described as reforms which had put its economy on firm footing. The crisis had a devastating effect on Indonesia’s poor. Its currency collapsed to a point where a worker had to fork out a whole week’s wages to pay for a small tube of toothpaste!

Likewise, on the eve of the crisis and the crash of the Philippines economy, IMF was predicting a 6% growth and had just approved a $1.1b extension of credit to the country.

IMF had no clue (and indeed, took no heed of warnings given) about the impending Global Financial Crisis of 2008 which wiped off trillions of dollars from the balance sheets of major banks, investment companies, superannuation funds and so on. Millions lost their homes, their entire life’s savings which they had invested in organisations which collapsed.

IMF couldn’t foresee the crisis which wrecked the economies of Ireland and Greece. In fact, it had given “a clean bill of health” to Irish Banks just before the crisis and in the case of Greece, its harsh medicine of pension cuts, wage freezes and tax increases drove the Greek economy into deeper trouble – its economy shrank 25% and unemployment peaked at 28% as a result.

No Mr Khaiyum, you would be wise not to put too much confidence in the IMF assessment of the state of our economy. In fact, the recipe for disaster is all there – unsustainable debt burden, high levels of consumption spending in the guise of boosting the economy and policies that benefit the rich at the expense of creating good jobs and purchasing power for the average person.

You might also want to take note of the one word of caution that did come from the IMF team: it’s call for the RBF to closely monitor the operations of our banks.