Thai government commitment 'key to economic recovery'

Thai government commitment 'key to economic recovery'

BANGKOK (AFP): International Monetary Fund chief Michel Camdessus said after meeting Thai Premier Chuan Leekpai yesterday that the new government's clear commitment to the IMF rescue plan was the key to economic recovery.

The country's collapsing economy will see renewed growth in the second half of next year, after restructuring financial and industrial sectors, if the new administration sticks to the program, Camdessus said.

Gross domestic product (GDP) growth, which has fallen to near zero from more than eight percent in the decade to 1995, should eventually recover to around 6.0-7.0 percent, he said.

Camdessus said the new premier told him the IMF program is right for Thailand, and added that he appreciated Chuan's "clear commitment to the IMF program."

Chuan and his economic team did not seek any revisions of the tough fiscal targets and financial reform measures required under the US$17.2 billion rescue deal, nor did they seek more funds, Camdessus said.

Thailand does not need "a few more millions or billions of dollars but rather requires faster implantation of the IMF program, to the letter," the IMF managing director said.

Aides to Chuan said earlier some adjustment may be sought in targets negotiated by the previous government in August as a deep recession and a credit crunch have since tightened their grip on the troubled economy.

But the purpose of this visit was to reassure the IMF that the new government would follow through on the agreement, not to renegotiate the deal, they said.

Camdessus said the IMF was not dictating terms to the government, either with regard to fiscal targets or other aspects, and that the agency's priority was to de-politicize the Thai aid effort.

The previous government under Chavalit Yongchaiyudh fell after terrorizing markets by backtracking on key economic measures designed to meet the targets on several occasions.

Tarrin Nimmanhaeminda, expected to be confirmed as finance minister in the new cabinet, said the new government and the IMF agreed in the meeting on the need to speed up implementation of the recovery plan.

The latest Letter of Intent signed between the two parties was basically aimed at strengthening the finance sector and foreign reserves, he said.

Thai authorities have said they will come up with a restructuring plan for the finance sector, where 58 firms struggling under a mountain of bad debt have been suspended.

The IMF and the government were working on new measures to deal with companies whose rehabilitation plans are rejected by the Financial Restructuring Agency, Tarrin said. He did not elaborate.

Camdessus said poor financial supervision and other weaknesses in economic management had derailed rapid growth -- normal at this stage of the region's development -- and called into question the appropriateness of the term "Asian miracle."

Tarrin said Camdessus told the meeting that solving the country's crisis of confidence was vital to an early recovery in the economy.

Supachai Panitchpakdi, expected to be confirmed as deputy premier and commerce minister, said the IMF-backed current account deficit target of 3. 0-3.5 percent of GDP -- down from above 8 percent in recent years -- will help restore confidence.