General Chavalit Yongchaiyudh, the defence minister, sprang a big surprise. He revealed yesterday that at the height of the 1997 baht crisis the government he headed struck a secret currency swap agreement worth a staggering US$10 billion (Bt440 billion) with the Chinese government.

“But the Bank of Thailand did not use the amount, so we did not have any other backup plan. But (the central bank) had done its best,” said Chavalit.

Is that really the case?

Chavalit has every reason to play down the catastrophic episode during which time he served as prime minister. It was true that at the height of the baht crisis he asked General Mongol Amphornpisit, then supreme commander in chief, to lead a Thai delegation to China to seek a financial rescue. For Chavalit had a very good relation?ship with the Chinese government.

The Thai delegation asked for a currency swap agreement worth US$10 billion with the central bank of China to back up Thailand’s dwindling foreign exchange reserves. The Communist politburo was readily willing to go along with the Thai request, but the central bank of China, then headed by Zhou Rongji, now the Chinese premier, did not concur.

As a result, Thailand was forced into a corner to seek a bailout package from the International Monetary Fund.

Over the past week Chavalit has been giving interviews in support of Rerngchai Marakanond, the former Bank of Thailand governor.

This followed a finding of the Finance Ministry panel, headed by Visut Srisuphan, the directorgeneral of the Department of Comptroller General, which recommended a civil action against Rerngchai. The panel found that Rerngchai alone should be held accountable for gross negligence over mismanagement of the country’s foreign exchange reserves.

During Rerngchai’s governorship, the central bank blew away more than US$32 billion in foreign exchange reserves in less than six months. The panel suggested that Rerngchai be fined US$1.2 billion, or Bt70 billion, over this huge damage that triggered a complete loss of confidence in the baht.

After the panel’s finding was made public, there ensued an immediate outcry that Rerngchai was being made a scapegoat, for he could not squander the foreign exchange reserves alone, although as governor he should bear full responsibility.

In the central bank’s bureaucratic practice, management of the foreign exchange reserves involved the Exchange Equalisation Fund, the Banking Department and the Currency Account, which backs the baht circulation. Moreover, the Economic Research Department also provided the strategy on the macroeconomic and currency out?look.

So all those people in these departments should also be held accountable if Rerngchai were to be found guilty. In addition, by law, the Finance Ministry oversees the Bank of Thailand. If something badly went wrong with the baht, the finance minister, then Dr Amnuay Viravan, should have taken some action. Amnuay cannot escape blame too. Finally, as prime minister, Chavalit cannot brush aside responsibility because he was constantly consulted by Rerngchai, although every time they met Rerngchai would assure him that the baht situation would be brought under control.

In fact, the Nukul Commission in 1998 completed a landmark report on how and why the Chavalit government and the central bank under Rerngchai’s governorship badly mismanaged the foreign exchange reserves.

This commission was formed by Tarrin Nimmanahaeminda, the former finance minister, to get to the bottom of what went wrong with the baht crisis, the Bangkok Bank of Commerce debacle and the Financial Institution Development Fund’s unlimited bailout of financial institutions. After the Nukul Commission, there were several other panels formed to try to bring to justice those responsible for the 1997 economic crisis.

Yet the process has been moving at a snail’s pace. Only when the case is about to expire on December 8 do the authorities try to look busy. There was a news report suggesting that the Finance Ministry would be backing off.

It would drop the case against Rerngchai because it was not serving anyone’s interest. Besides, it would hurt several individuals who have joined the Thaksin government. Prime Minister Thaksin Shinwatra was himself deputy prime minister during the 1997 crisis.

So the Finance Ministry has passed the buck to the Bank of Thailand to deliberate on Rerngchai’s case.

The central bank will be taking a look at the issue today before coming up with its final verdict as to whether to go ahead with civil action against Rerngchai or to drop the case.

You already know the result.

Thanong Khanthong