Growing anxiety over the problems in Indonesia and an apparent lack of government resolve to tackle them was fuelled by the Indonesian budget presented last night by President Suharto. He ignored the IMF's demand for a budget surplus and shied away from some of the austerity measures which had been expected in return for the IMF's $23bn (pounds 14bn) bailout.
The budget, which will be balanced, will increase overall spending by 32 per cent and preserve a domestic fuel subsidy. The Indonesian rupiah lost 13 per cent of its value at one point in yesterday's trading before clawing back to a 9 per cent fall, which still represented a record low.
South Korea also said on Tuesday it was discussing changes in macroeconomic targets with the IMF to take account of the country's deteriorating economy. But Korea, deep in talks about rescheduling its foreign debts, has indicated that it is likely to accept the previously unpalatable suggestion of having the state underwrite private corporate debt. Lim Chang-yuel, the Finance Minister, said he would accept this proposal as the price for rescheduling.
Analysts said the difficulties faced by governments in meeting the demands of the IMF raised questions as to whether the Fund's bitter medicine was the right prescription for the region's economic ills. It also highlighted how quickly basic economic assumptions could be blown seriously off course.
"These agreements, in terms of the growth, inflation and budget forecasts, were rushed through pretty quickly without real reference to the dynamism of the crises unfolding," said Graham Neilson, Asia economist at Banque Paribas. "The collapse of the baht and rupiah since these targets were first agreed makes them totally unrealistic."
South Korea went against regional trends yesterday with its currency rising in value and the stock market gaining 2.5 per cent. This came with news that the government is talking to the IMF about lowering the economic target growth rate to zero to 2 per cent from about 3 per cent, while turning the previously agreed $4.3bn current account deficit to a surplus this year.
In Taiwan, where the local currency plunged to an 11-year low against the dollar, the central bank governor Sheu Yuan-dong said his country could not prevent depreciation against the "super strong" US dollar. Even the Japanese yen was down to almost 134 against the dollar, the lowest rate of exchange for five-and-a-half years.
In Malaysia talk of bank failures took the local currency down to a new low following a 6 per cent fall. In Manila a surge of business brought foreign currency trading to a halt before the Philippines government lifted volume limits.
After trading resumed the peso slid to another record low against the dollar, losing 5.6 per cent of its value.
In Thailand the baht dropped almost 4.8 per cent, taking it well below the previously unthinkable exchange rate of more than 50 baht to the dollar. It closed at just over 52.