Thai central bank warns of foreign debt

Thai central bank warns of foreign debt

BANGKOK (Reuter): The central Bank of Thailand (BOT) said yesterday it was concerned about a sharp rise in foreign borrowings, especially by the nation's private sector.

"We must start to be careful about the creation of foreign debts in the future," said BOT economist, Bandid Nijathaworn.

He told a news conference Thailand's foreign debts at the end of last year totaled 82.6 billion baht (US$3.30 billion) compared with a mere 37.9 billion baht in 1991.

The ratio of foreign debt to gross domestic product rose to 49.3 percent last year from 38.3 percent in 1991, he said.

Bandid said the central bank believed that by reducing the high Thai current account deficit and boosting domestic savings, foreign borrowings would eventually be reduced.

Bandid said there should also be a close watch on the use of foreign debt to ensure that such funds were used to generate real benefits for the domestic economy.

Bandid shrugged off foreign investor concern over Thailand's heavy reliance on short-term foreign funds because the nation had strong gross international assets and high long-term funds to finance its current account deficit.

"Even though short-term foreign borrowings rose substantially, we did not finance our current account deficit by using short- term funds," he said.

At the end-March 1996, Thailand's foreign reserves totaled $39 billion, while commercial banks' foreign assets amounted to $10.7 billion, he said.

"The country's gross international assets (foreign reserves plus commercial banks' foreign assets) was $49.7 billion baht which was much higher than the short-term foreign funds of $41.5 billion at the end of March," he said.

Thailand's total short-term debt at the end of 1995 was 41.1 billion baht compared with 15.4 billion baht in 1991, Bandid said.