IMF considers worst to be over for some countries in Asia

Japan is set for recovery in the second half of next year, the International Monetary Fund (IMF) chief Mr Michel Camdessus said in Paris yesterday after admissions that the Fund had neglected some key debt data signalling the crises in Asia and Russia.

Mr Camdessus said that for several Asian countries, at least, "the worst has passed". In Japan, the motor for Asia's economy, "the second half of next year should be the year of recovery" following a "catastrophic" year during which growth was likely to decline by 2.5 per cent or more, Mr Camdessus told French radio.

Other Asian countries would begin to recover in 2000 or 2001, he said, adding that "growth would already have begun to recover if we had not had a crisis at the heart of the crisis, which is the Japanese crisis".

His forecast came the same day the German weekly, Die Zeit, made available admissions by Mr Camdessus that the IMF had not been properly informed of the looming disasters and should have done more to monitor the financial sectors.

"Yes, we have made mistakes," he admitted in an interview to be published today. "For instance, we did not take notice of information on short-term capital transactions soon enough.

"But either the authorities in the crisis countries did not have the data then, or they did not want to release them because they were so worrying."

Turning specifically to Russia, he said that when Russia joined the IMF in 1992, the few controls on capital movements that existed in the country then were ineffective either because of poor organisation or corruption.

Mr Camdessus told French radio that the IMF would now support Moscow only if new Prime Minister Yevgeny Primakov restored the ruble and budget to health and restructured frozen domestic debt in a "civilised" way for creditors.

"The statements I have heard from the new government have been quite encouraging," he said, but added that the IMF is waiting to see whether the new Russian government "will have the will" to contain inflation.

The IMF has suspended all its loan programmes, worth $12.5 billion this year alone, to Russia until the new government explains how it plans to steer the country out of the acute financial crisis which has eroded the value of the currency, undermined the banking sector and bankrupted the government.

Russia's former finance supremo, Anatoly Chubais, warned in the Moskovsky Komsomelets newspaper yesterday that Russia faced the kind of crisis which would make last month's devaluation and domestic debt default look like "child's play".

Only the disbursement of a promised IMF loan instalment of $4.3 billion could buy the insolvent government a way out, he said.

Camdessus told French radio that growth in Europe should amount to 2.0-3.0 per cent next year and should accelerate in the years ahead to enable countries in difficulty to emerge from the crisis. In 1999 "Europe is likely to grow slightly less quickly than this year," he said.

The Group of Seven (G7) countries had to play the role of the engine of world growth because the United States and Europe were doing well when the rest of the world was in trouble. "It is good that the Europeans are trying to make their interest rates converge as low as possible, that is to say at the level now in France and Germany."

In a separate interview in the newspaper Le Figaro, Camdessus also said: "I am certain that Latin America will not fail."