International lending agencies such as the International
Monetary Fund (IMF) and the World Bank will be more flexible
in assisting countries affected by the credit crunch than
they were in the 1980s and 1990s, said noted economist Nouriel
Roubini is professor of economics at New York University
Stern School of Business.
time around, IMF conditionalities will be less stringent
than they were in the 1980s for a number of reasons.
He said in the past, financial crises were caused by policy
and financial and macro decisions taken by countries, which
such lending agencies as the IMF agreed to assist on the
condition of belt tightening.
He said this time around, the financial shock for a number
of economies is coming from the centre of the financial
system, and the IMF will not only be more flexible, but
has learnt lessons from the 1990s.
Roubini said back then, the IMF told countries in Asia and
elsewhere to tighten their belts, that there were to be
no bailouts, no deposits and to prepare for fiscal contraction.
He said similar things are now happening in the US, but
just the opposite is taking place, with the bailout of financial
emerging markets are saying there is a double standard.
We were being told to do all these things, tighten our belts.
Theres a severe recession now, youre telling
the United States to do just the opposite.
IMF learned the lesson that sometimes you need fiscal and
monetary discipline if you have problems in other places
if the shocks come from the outside. You might actually
need to ease and try to provide liquidity for these countries
rather than ask them to do things that might be counter-productive,
Roubini was the keynote speaker on Thursday at RBTTs
annual investors forum, which was held at the Mandarin
Oriental hotel, Miami. The forum focused on the theme, Capital
Markets in the Caribbean and Central America, The Way Forward.
Roubini said the IMF has become more nuanced
in its understanding of what drives crises and what are
the appropriate policy responses, as no one type of medicine
works for all.
He said it was very important for the international financial
community to help some Caribbean countries, which have similar
characteristics in the composition of their capital comparative
advantage, may be excessively reliant on a few commodities
and have not diversified their economies away from tourism.
He said the shock from the present credit crunch did not
occur due to the mistakes of these small countries, but
were the mistakes of the US and advanced countries.
He said the credit contraction is like a tsunami hitting
many small economies in Latin and Central America and the
Caribbean, and it is up to the international financial community
to help those countries which deserve assistance.
Roubini said some of these countries have to ensure they
make the necessary policy changes to ensure their fiscal
conditions are not worsened.