After an emergency meeting with fund officials in Bangkok yesterday, Thai ministers approved a plan to seek urgent aid from the international lender.
"We need their expertise, we need their experience," said Thanong Bidaya, Thailand's battered finance minister. He said the country also needed an IMF standby credit line - perhaps as much as US$20bn (pounds 12bn) - to shore up the economy and help overcome Thailand's deep-seated and largely neglected financial problems.
Prosperity over the past 20 years made Thailand one of the world's most dynamic "Asian Tiger" economies. But, plagued by festering economic problems, including low exports, a badly overstretched banking sector and a slumped property market, it has suffered serious reverses. The abandonment of its fixed-exchange rate currency system earlier this month caused the baht to fall 20 per cent against the dollar, prompted massive outflows of foreign capital and sent shock waves throughout South-east Asia. Speculative attacks hit the currencies of Malaysia, Indonesia and the Philippines.
The crisis has sparked angry reactions from Malaysia, which accuses Western investors and governments of seeking to dominate the South-east Asian economies. Foreign minister Abdullah Badawi told a meeting of Asian and Western nations yesterday that Asean economies "continue to be bedevilled by currency fluctuations caused by hostile elements bent on such unholy actions".
In exchange for what amounts to an economic rescue plan, the IMF is expected to demand stringent control over the Thai economy, forcing painful tax increases. Loans are likely to be dependent on severe cuts in government spending and assurances that IMF funds will not be used to bail out the country's troubled financial companies, many of which have been saddled with bad debts from an oversupplied property sector.
Tough IMF conditionality could further destabilise the unpopular government of Chavalit Yongchaiyudh. He may have to follow in the footsteps of his former finance and commerce ministers, who resigned this month, and Rerngchai Marakanond, governor of the central bank, who was reported to have tendered his resignation yesterday.
The head of a computer company that was supposed to be the cornerstone of Thailand's attempt to build a high-tech sector resigned yesterday. Alphatec Electronics PCL said Charn Uswachoke, the chief executive officer, had resigned and an auditor had found evidence of "improper transactions" in company financial statements.
Hamish McRae, page 19Reuse content