The International Monetary Fund has said that the programmes it has backed to solve the financial crises in East Asia will be seen to be working in a few months. And, in an interview with the BBC, the Fund's Deputy Managing Director, Stanley Fischer, says that if the right policies are followed the crisis will mark only a pause of a year or two in economic growth. Our economics correspondent, James Morgan, reports:

James Morgan's report (1'58")

The IMF has put together more than £100bn in rescue programmes for Thailand, Indonesia and South Korea. Yet local currencies still fall, and share prices continue to decline.

But the number two man in the Fund, Stanley Fischer, says these are common features of the early stages of such rescues - more facts become known about the crisis and people take note.

But he adds: "I expect this will turn around gradually and in a few months from now, we will forget there was this initial phase, which is not an unusual phase."

But critics argue that the policies recommended by the Fund make matters worse. Professor Jeffrey Sachs of Harvard University attacks raising interest rates, as has been done in South Korea.

He says: "For the IMF to go in and announce that interest rates should double and then rise still further threatens to put the entire corporate sector into bankruptcy, even absolutely viable enterprises. The market has smelled that. It says: 'This doesn't make sense. Everything's going to come down.' And so the flight from Korea accelerated."

Mr Fischer agrees there's a crisis of confidence. But he says: "There is no way of turning around an outflow of capital without raising the incentive for people to keep money at home, which is to raise interest rates. It's also the incentive for others not to withdraw their money. So that element is common between Mexico and all the other countries here, that is the classic treatment for a crisis of confidence."

And in his interview with the BBC, Mr Fischer said that the problems of the financial sector could be dealt with in a year or two. What we are seeing now, he said, was a pause which should not last more than a year or two in a remarkable period of economic growth. After that the economies would not grow so fast as in the recent past, but still at a healthy rate.

When asked what he would say to the people of the region, Mr Fischer said: "You will be growing again if you get on and deal with them (the problems) now_ And three or four years from now, this episode will be seen, as it has in the case of Mexico, as something that stopped the growth process for a while, led to an important restructuring of the economy, made it healthier, and enabled you to resume the sustained growth of which your economies, with their savings rates, with their entrepreneurial people, are fully capable of."
 

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