International financier George Soros yesterday blamed Malaysian Prime Minister Dr Mahathir Mohamad and the policies of his government for the malaise in the country's financial markets.
Speaking after his keynote address at the World Bank- IMF annual meetings, Mr Soros spoke broadly on Asian markets, saying he was more positive on Indonesia and believed the Hong Kong dollar peg was safe.
'The recent turmoil in Asian markets raises some thorny issues about currency pegs, asset bubbles, inadequate banking supervision and the lack of financial information,' he said.
'Markets cannot be left to correct their own mistakes, because they are liable to overreact and to behave in an indiscriminate fashion.' Painting Indonesia with the same brush as Malaysia was one such failure, Mr Soros said.
He said Malaysia's problem was excessive credit expansion. Credit was approaching 160 per cent of gross domestic product, of which finance company loans represented about 57 per cent of GDP - 'significantly larger than the total banking debt in most developing countries, including Indonesia'.
During the past three years, Malaysia's credit growth had averaged 30 per cent a year.
'This boom has been generated by the Bank Negara moving from a substantial net borrower from the banking system to becoming a net lender to the banking system,' he said.
