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US$200m available to finance Thai deficit


SINGAPORE, APRIL 3, 1999  -- Thailand will still have room to draw about US$2 billion from the Miyazawa initiative and other international funding sources to finance the budget deficit next year, if it's still necessary to lift the economy out of the doldrums, said Hubert Neiss, the IMF's director for Asia-Pacific.

''There will be sufficient funding to cover the budget deficit,'' he said.

Neiss, who is in charge of the South Korea, Thailand and Indonesia support programmes, said the IMF welcomed Thailand's announcement of a Bt130 billion economic stimulus package early this week, saying that it will help to get the Thai economy out of recession.

He cautioned that nobody can know for sure whether the stimulus package aimed at expanding aggregate demand will work. But if it is not adequate, there will be another round of deficit spending by the government which will have access to enough financing from the Miyazawa Plan, the IMF the World Bank or the Asian Development Bank, he added.

However, Neiss is positive about the prospects of Thailand's recovery this year which also depends on other factors such as the pace of bank and corporate reforms and the external situation.

He said banking and corporate reforms are moving along a steady course, although more work still needs to be done.

Neiss did not rule out the possibility of additional financial-institution closures if they fail to reform successfully.

''It depends on the management and the competitiveness of the banks, some of which will need to find foreign partners,'' he said.

On the monetary side, interest rates in Thailand have been coming down quickly and sharply to support the expansionary policy.

Neiss does not foresee the risk of capital outflows as long as Thai and US interest rate differentials are kept at a narrow range.

In this situation, he added, the Thai authorities will continue to pursue both fiscal and monetary policies to support economic recovery.




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