Financial Crisis and Fall From Power
During the 1997 Asian Financial Crisis Anwar, as finance minister, supported the International Monetary Fund (IMF) plan for recovery. He also instituted an austerity package that cut government spending by 18%, cut ministerial salaries and deferred major projects. "Mega projects", despite being a cornerstone of Mahathir's development strategy, were greatly curtailed.
Although many Malaysian companies faced bankruptcy, Anwar declared: "There is no question of any bailout. The banks will be allowed to protect themselves and the government will not interfere." Anwar advocated a free-market approach to the crisis, including foreign investment and trade liberalisation. Mahathir blamed currency speculators like George Soros and supported currency controls and tighter regulation of foreign investment.
In 1998 Newsweek magazine named Anwar the "Asian of the Year". However, in that year, matters between Anwar and Mahathir came to a head around the time of the quadrennial UMNO General Assembly. The Youth wing of UMNO, headed by Anwar's associate Ahmad Zahid Hamidi, gave notice that it would initiate a debate on "cronyism and nepotism". At the General Assembly, a book, 50 Dalil Kenapa Anwar Tidak Boleh Jadi PM ("50 Reasons Why Anwar Cannot Become Prime Minister") was circulated containing graphic allegations as well as accusations of corruption against Anwar. The book was written by Khalid Jafri, an ex-editor of the government-controlled newspaper Utusan Malaysia and former editor-in-chief of a failed magazine, Harian National. Anwar obtained a court injunction to prevent further distribution of the book and filed a lawsuit against the author for defamation. Police charged the author of the book with malicious publishing of false news. Among the allegations in the book was that Anwar is homosexual. The police were instructed to investigate the veracity of the claims. In what the Sydney Morning Herald termed a "blatantly political fix-up", Anwar was charged with sodomy and corruption and was convicted of both and given a 15-year prison sentence.
While he was in police custody in 1998, Anwar was beaten by the then Inspector General of Police, Rahim Noor. Rahim was subsequently found guilty of assault and jailed for two months in 2000. He made a public apology to Anwar and paid undisclosed damages.
In 1999, Anwar brought suit against Prime Minister Mahathir for defamation for allegedly uttering accusations of immoral acts and calling Anwar a homosexual at a news conference in Malaysia.
Read more about this topic: Anwar Ibrahim
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