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Malaysia's capital controls paid off: IMF

Date: 09 Sep 1999
Time: 03:54:40
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Malaysia's capital controls paid off: IMF

WASHINGTON, Sept 8 (AFP) - The controversial capital controls imposed by Malaysia in the wake of the Asian financial crisis were more effective than predicted by observers, the IMF said Wednesday.

The controls, introduced in September 1998, "had produced more positive results than many observers had initially expected," the International Monetary Fund said in its annual review of the Malaysian economy, published Wednesday.

And the directors lauded "the pragmatic and flexible way" Malaysia had implemented and adjusted the controls.

They cited the February 1999 decision to replace restrictions on repatriation of portfolio investements with an exit tax.

Furthermore, a number of IMF Directors supported the Malaysian authorities plan to maintain the restrictions -- designed to insulate the economy from volatility in the foreign exchange markets -- while "preparing for an orderly exit," from them.

Others were more sceptical, however, warning that the measures would have an adverse effect on the prospects for recovery.

The controls set a peg of 3.80 ringgit to the dollar, and included a one-year ban on the repatriation of foreign portfolio investments, which ended September 1 and sent 328 million dollars out of the country.

Overall, the Asian contagion had taken a greater toll of the Malaysian economy in 1998 than expected, with gross domestic product contracting by 6.7 percent while demand fell 25.5 percent, the Fund said.


Last changed: September 09, 1999