Thailand set to part from IMF

THAILAND'S government is eyeing an early exit from the International Monetary Fund's (IMF) support programme, arguing that the economic recovery makes it unnecessary for either Thailand or the IMF to commit to the ninth letter of intent.

"We're still in talks with IMF officials over the possibility of not having to commit to the ninth letter of intent because most of the major stabilisation and reform works have been accomplished," said Finance Minister Tarrin Nimmanahaeminda.

"Besides, we have found it no longer necessary to draw down any money from the support programme," he added.

IMF officials are presently in Bangkok reviewing Thailand's financial and economic reforms under the US$17.2 billion support programme. In exchange for the IMF's financial support, Thailand is obliged to follow policy conditions approved by the IMF's executive board in order to correct macroeconomic imbalances and deal with financial woes.

However, with the baht stable, interest rates falling, inflation low, exports higher, and strong domestic demand boosting economic growth, Thailand has succeeded in emerging from its economic crisis.

IMF officials are quite positive about Thailand's plan to exit the IMF programme earlier than this August, Tarrin said. Ultimately, however, the IMF's Executive Board would make the final decision.

The Thai government, under the administration of Prime Minister Chavilit Yongchaiyudh, was forced to seek a bailout from the IMF in Aug 1997 after depleting most of its foreign-exchange reserves.

A high level of foreign-exchange reserves maintains confidence in the baht. Thailand depleted virtually all of its reserves in the first half of 1997 following capital outflows and attempts to defend the baht against speculative attacks. Net foreign-exchange reserves fell to a mere $165 million on July 27, 1997, raising the spectre of a worthless baht.

So far, the government has committed to eight quarterly letters of intent with the IMF. Each letter entitles Thailand to draw down a set amount of funds for balance-of-payments support.

In Aug 1997, Thailand drew down $6.1 billion from the IMF to replenish its depleted foreign-exchange reserves. Three months later it drew down a further $2.8 billion. Thailand drew down $1.3 billion in Feb 1998 and $1.2 billion in May 1998. It drew down $500 million in Aug 1998, $500 million in Nov 1998, $1.1 billion in Feb 1999 and $500 million in May 1999.

Thailand stopped drawing down IMF funds after May 1999 because its foreign-exchange reserves, boosted by a massive turnaround in the current account, rose above $34.8 billion.

If the foreign-exchange swap obligations of the Bank of Thailand and the IMF loans are deducted, Thailand still enjoys comfortable net foreign-exchange reserves of $20 billion, Tarrin said.

However, Thailand is required to begin repaying IMF loans this November after the support programme officially ends this August. The repayment period will span three years, which is equal to the length of time Thailand drew down funds.

BY THANONG KHANTHONG