Emerging Market Crises and the IMF: Rethinking the Role of the IMF in the Light of Turkey's 2000-2001 Financial Crises

Abstract

Recurring financial crises in the semi-periphery have raised serious question marks concerning the role of the IMF in the era of financial globalization, particularly in the aftermath of the Asian Crisis of 1997. The present paper attempts to provide a critical and at the same time a balanced perspective on the Fund's involvement in crisis-ridden emerging markets with special reference to the recent Turkish experience. The analysis points towards both the limitations underlying the Fund's approach itself as well as some of the dilemmas faced by the organization in trying to reform the economies of debtor countries given the nature of the domestic political environment in the countries themselves. It is also argued that the kinds of reforms promoted by the Fund are necessarily incomplete in so far as they focus only on the regulatory role of the state, neglecting issues relating to income distribution and longer-term development in the process. Two key conclusions follow. Firstly, crisis-ridden countries need to develop a domestic political base to "internalize" the kind of reforms sponsored by the IMF, which are important in terms of their ability to benefit from the process of globalization. Secondly, the countries concerned need to extend their horizons and develop their domestic capacities in areas such as income distribution and longer-term competitiveness, areas that not traditionally emphasized by the Fund.