IMF Acts to Contain an Investor Exodus --- Agency Wants to Limit Financial Problems In Developing World
WASHINGTON -- As international financial troubleshooters cobble together multibillion-dollar rescue packages for Turkey and Argentina, they're haunted by memories of how isolated economic woes in a few countries in the late 1990s grew into a global financial crisis.</br></br>This time, the International Monetary Fund and the Clinton administration hope to contain the upheaval with a $7.5 billion loan for Turkey and new financing -- still being negotiated -- for Argentina. But they're still anxious that investors, already fretting about a possible U.S. recession and skittish about emerging markets, might react to trouble in the two countries by withdrawing their money from other developing nations.</br></br>"What the fund is worried about is they want to localize this stuff because there are other problems out there," said Morris Goldstein, a senior fellow at the Institute for International Economics, a think tank here. Those other problems -- a slowing U.S. economy, high oil prices, stock-market volatility and political turmoil in nations ranging from Peru to Indonesia -- are serious enough without a major developing nation finding itself unable to pay foreign debts, Mr. Goldstein said.</br></br>IMF and U.S. officials say they don't believe the problems have spread yet, although even if they did believe it they would be reluctant to say so aloud for fear of sparking panic. Investors, they say, learned from the Asian crisis not to shun one country just because a neighbor overspends its budget or allows its banks to make unwise loans.</br></br>"Obviously, markets are nervous," said an IMF official. "But they also recognize and seem to reward countries that are following good policies or getting their acts together."