The Crisis And The Prospects For Ifis

811 Words Sep 17th, 2016 4 Pages
Korea’s “IMF” Crisis and the Prospects for IFIs

In 1997, the Thai baht came under speculative attack from international investors and the Thai government was eventually unable to support its currency peg. Due to the interconnected nature of the global economy, contagion occurred and the problems affecting Thailand spread to countries such as Malaysia, Indonesia, the Philippines, and South Korea. This event came to be known as the Asian Financial Crisis in the West. However, in South Korea it is known as “the IMF,” as misguided policies of the International Monetary Fund (IMF) led to a deep and more painful recession, inequality and an gutted the nation’s middle-class. Below is an overview of the IMF’s “rescue” of Korea in 1997/1998, a description of my opinion on the situation, and my opinion of the fairness and effectiveness of international financial institutions (IFIs) in general.

The IMF offered assistance to South Korea in December of 1997, but misguided conditions attached to the loans hurt the country. The IMF intended help avoid mass defaults on dollar denominated loans, and fight inflation that was severely affecting the economy of Korea (and other countries). Importantly, the crisis hit Korea after what was one of the most spectacular rises in wealth ever witnessed in history. In the three decades prior to the crisis, Korea came to be known as an “Asian Tiger” economy due to its fast and strong rise. In fact, the Korean economy was relatively healthy at the…
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