Int'l donors pledge $16b for Thailand

Int'l donors pledge $16b for Thailand

TOKYO (Reuter): The international community came to the rescue of financially strapped Thailand yesterday, pledging a total of US$16 billion in loans from the International Monetary Fund (IMF) and Asian nations led by Japan.

The offer is the largest loan package to a single country since the IMF and donors led by the United States made nearly $40 billion available to Mexico in 1995.

Indonesia will contribute $500 million to the package, IMF deputy managing director Shigemitsu Sugisaki told a news conference.

Thailand -- long one of Southeast Asia's booming "tiger economies" -- had been looking for $12 billion to $15 billion to plug financial holes created when it floated its baht currency last month after failing to defend the currency from speculative attacks.

Sugisaki said that the IMF had estimated that Thailand needed funds in the order of $14 billion for 1997 and 1998 and that participants had supported the request.

"The meeting proceeded very smoothly and positively. Some $16 billion in financial support was promised, including the proposed IMF contribution of $4 billion," Sugisaki said.

"The measures they have taken and are going to take will send a good, strong signal to the market and the Fund (IMF) management is going to propose a strong package to the highest board for its consideration," Sugisaki said.

He said that Malaysia and other Asian countries had taken steps to make sure there was no spillover effect from Thailand's problems.

Thai Finance Minister Thanong Bidaya told the news conference that the package would basically be used to shore up Bangkok's foreign reserves.

Japan, which hosted the meeting, pledged to match the $4 billion to be provided by the IMF.

"This very credible economic adjustment package and financing package for Thailand should restore calm to financial markets in this region and restore calmness to the currencies of this region," Joseph Yam, Hong Kong Monetary Authority chief executive, told Reuters Financial Television.

The United States did not pledge individual aid, but will support the package through the IMF, Sugisaki said.

Australia, Malaysia, Singapore and Hong Kong pledged to contribute $1 billion each to the effort, while South Korea and Indonesia would each give $500 million in loans, Sugisaki said.

Contributions from China, which is seriously considering joining the aid package, and funds from the Asian Development Bank and World Bank may provide another $3 billion of the total.

Bangkok last week unveiled an austerity package to meet IMF demands, raising its value-added tax, announcing plans to cut its current account deficit and closing more than half of its financial institutions.

Also yesterday, Thailand's cabinet approved a broad outline to cut its 1997/98 (October-September) budget by 50 billion to 70 billion baht ($1.6 billion to $2.3 billion).

Thai exports, meanwhile, rose about 23 percent year-on-year in July following the baht's more than 20 percent depreciation last month, the Thai Customs Department said yesterday.

"We realize the devaluation of the baht will create some inflationary pressure in Thailand but somehow we feel it is a necessary step to make Thai exports more competitive," Thanong said, adding he hoped to keep inflation below 10 percent while reducing the current account deficit to about 5 percent this year, and 3 percent in the following two years.

Thailand has $89 billion in foreign currency debt and Japanese banks are owed about half that amount, he said.

Solidarity -- Page 10