IMF made fatal mistakes in Argentina - economist

The IMF made fatal mistakes in its advice to Argentina according to Nobel economic laureate Dr Joseph Stiglitz.

The IMF made fatal mistakes in its advice to Argentina according to Nobel economic laureate Dr Joseph Stiglitz.

The former World Bank chief economist said IMF support for Argentina's ten year peso/dollar peg, which finally ended this year after the biggest debt default in history, and misguided lending by the fund was in large part responsible for the country's crisis.

"The IMF encouraged this exchange rate system. Now it is less than enthusiastic, though Argentina is the one paying the price," Mr Stiglitz wrote in an article published by anti-globalisation group ATTAC.

Dr Stiglitz has frequently criticised the fund.

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The currency peg and contractionary fiscal policy encouraged by the IMF and backed up with funding for Argentina worsened the country's recession at a time when markets were fragile in the wake of the Asian crisis and the US was entering recession in 2001.

"The IMF will work hard to shift the blame - there will be allegations of corruption and claims Argentina did not pursue needed measures," Dr Stiglitz wrote.

Dr Stiglitz said the IMF had made a series of policy mistakes in its preference for large bailouts accompanied by contractionary fiscal policy from the 1997 Asian crisis onwards.

"Argentina's crisis should remind us of the pressing need to reform the global financial system and thorough reform of the IMF is where we must begin," Dr Stiglitz wrote.