Thailand seeks extra $3bn to stave off crisis
Thursday 21 August 1997
Officials from the Bank declined to comment on statements from the Thai government that it would be calling for the extra loan. The extra assistance, which would be used to bolster foreign reserves and help cover a balance of payments shortfall, would bring in funds from the US Federal Reserve and European central banks.
That would widen the geographic spread of assistance for Thailand, which has so far included contributions from countries in the Asia-Pacific region as well as the International Monetary Fund, World Bank and Asian Development Bank. The IMF was meeting yesterday in Washington to approve its own $4bn contribution.
The package is designed to bail out Thailand, which was forced to devalue its currency after persistent attacks by speculators in the foreign exchange markets.
Several South-east Asian currencies have fallen victim to speculation in recent months, with the Hong Kong dollar's peg to the US dollar coming under fire most recently.
The BIS is a global centre for co-operation among central bankers and provides a wide array of financial services to these banks. This includes short-term bridge financing in the event that a country is facing a liquidity crunch.
In 1995 the BIS arranged for a $10bn short-term facility for Mexico as part of an international package that included $20bn from the United States and $17.8bn from the IMF.
Bankers said Thailand's recourse to the BIS was an indication it may have difficulty keeping its international reserves above a $23bn level prescribed by the IMF. Those worries kept downward pressure on the baht, which has lost more than 20 per cent of its value since it was floated on 2 July. Thailand has foreign debt of nearly $89bn, around half of which is held by Japanese banks.
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