Virabongsa in at the deep end
NEWLY-APPOINTED Deputy Prime Minister Dr Virabongsa Ramangkura sees the next three months as most critical for the ailing Thai economy, pledging to tackle the non-performing loans in the finance sector, shrink the current account deficit and stabilise the foreign exchange reserves as his top priorities in restoring macroeconomic confidence.
''The next three months will be most critical. If I can make any contribution by pushing the country one step back from teetering off the edge of the cliff, then I'll consider myself as having accomplished this enormous task," he said in an interview with a small group of reporters late on Friday.
The conservative economist, who was one of the architects of the 1984 baht devaluation, admitted that he was concerned about the number of non-performing loans in the financial system, which must be effectively tackled. Shrinking the economy to a level supported by domestic savings and managing foreign exchange reserves are also his priorities in an attempt to bring the macroeconomic imbalances under control.
These measures will be painful and will further put unemployment under pressure. But there won't be gain without pain for the country that has collapsed from the bubble economy.
The arrival of Virabongsa last week was part of a ''cosmetic" Cabinet reshuffle, desperately carried out by Prime Minister Chavalit Yongchaiyudh to keep his administration afloat. Virabongsa has received positive response from the business and financial community, yet the reshuffle has not been radical enough to win renewed confidence.
Virabongsa said he is not a white knight who can improve things overnight since the economic malaise is so serious that it will take at least three years before Thais can hope to see it take off again. ''I don't know as yet what is going to happen from now on. But I am certain that next year things are going to get worse," he added. ''If we don't handle it well, we won't see growth in several years to come."
Thailand is facing the harshest economic crisis since 1960s from years of living beyond its means, which has pushed the country's external debt burden to almost US$90 billion. The weakened economy and export slowdown have triggered fears that the overextended country might default on its external debts, leading to a currency devaluation on July 2nd and prompting the International Monetary Fund to step in with a bail-out package worth a total of US$17 billion.
Virabongsa, who has already been jokingly dubbed as the IMF minister by the local press, added: ''I cannot say anything much at this point because I do not have the information as yet. I need to take a look at the letter of intent signed between the Thai government and the IMF before I form an impression of what needs to be done."
Virabongsa said he will work closely with all concerned and consult Thanong Bidaya, the finance minister, Dr Chaiyawat Wibulsawasdi, the Bank of Thailand governor, Dr Narongchai Akrasanee, the commerce minister, and Wirat Wattanasiritham, the secretary-general of the National Economic and Social Development Board, on Thailand's macroeconomic management.
''I shall be concentrating wholly on macroeconomic picture. Politics will be completely out of my way," he pledged.
Virabongsa admitted that the key to saving the Thai economy from going down the drain is to win back confidence from the international community, particularly the foreign lenders who have provided Thai businesses with short-term loans crucial to financing the current account deficit.
Without confidence, Thailand will risk further running down its foreign exchange reserves, which are believed to be at the bare minimum if a wave of outflow in short-term debt recalls and the unwinding of the central bank's forward intervention to prop up the baht are taken into account.
Although it is premature for Virabongsa to spell out how he will tackle the Thai macroeconomic imbalances, he personally believed that if Thailand can reduce imports by at least 20 per cent, it will quickly return to a more stable path.
In 1986 Thailand had a current account surplus of US$300 million from an austere economic programme and a baht devaluation two years before. This factor crucially formed a platform for the Thai economy to take off in full stride in 1987 and achieve a decade of spectacular growth.
BY Vatchara Charoonsantikul and Thanong Khanthong