Thai plan to ditch IMF crutches risky

Thai plan to ditch IMF crutches risky

BANGKOK (Reuters): Thailand may have been a little
overconfident in deciding to wean itself from the International
Monetary Fund, financial analysts said on Tuesday.

The country's large foreign debt of about $81 billion and the
possibility, however slim, of a second Asian financial crisis
make such a plan risky, they told Reuters.

"A lot has improved in Thailand since the crisis hit in 1997.
But risks are still there. We are living in an extremely
vulnerable globalized financial world," said a senior Thai bank
executive who declined to be identified.

"There is no guarantee that there won't be a financial crisis
in the region in the near future. Even though our (baht) currency
is floated, there is a chance, however remote, that we might need
money to defend the currency," he added.

"With an external debt over $80 billion, Thailand is still
vulnerable," he said.

Arporn Chewakrengkai, a senior economic advisor to Prime
Minister Chuan Leekpai, said Thailand had stopped withdrawing
money from the IMF and was considering repaying the loans early.

Thailand's level of foreign reserves is comfortable, the
economy is headed toward recovery and its balance of payments on
the current account could turn into surplus, she said.

IMF contributed around $3.9 billion to a $17.2 billion
multilateral package it arranged for Thailand in August 1997
after authorities floated the baht -- a move that plunged the
country into its worst recession in decades.

Thailand has so far drawn $14.1 billion and now plans to start
repaying earlier than September 2000 as originally planned.

"Finance Minister Tarrin (Nimmanahaeminda) is a very cautious
man. He would not have thought of stopping taking loans and
repaying early if he does not believe we can do it," Arporn said.

"The foreign reserves at $32.4 billion can finance 8.5 months
of imports or short-term debt. We are comfortable with it. If we
borrow more, we will have to unnecessarily shoulder more interest
burdens," she said.

Arporn noted that debt repayments for the IMF package next
year would be not more than $1.0 billion.

"The first payment to the IMF would be only $203 million. The
rest will be for other bilateral loans in the package which are
mostly long term," she said.

Thailand's external debt at the end of August stood at $81.2
billion. Of the total, around 22 percent matures within a year.

She said the repayment should not affect Thailand given
indications of economic recovery, expected strong exports and a
current account surplus seen at $7 billion to $8 billion in 2000.

"We are also positive about the economic outlook. But there is
always room that something wrong could happen and reverse all
those positive aspects we talk about," said Maris Tarab, head of
research at KGI Securities One.

"However, at this juncture I think the chance of another
crisis in the region is slim. Therefore, if Thailand decides not
to withdraw further loans and repay debt early, it should be okay
for the country. It might even send a positive message about the
Thai economy," he said.

Market confidence in Thai efforts to foster economic recovery
is needed before Bangkok throws away its IMF crutches, analysts
said.

"With the floating currency, I think the question of whether
reserves are adequate is an empty question. But at the same time,
we cannot neglect the irrational effects on the confidence," said
Richard Henderson, research director at Kim Eng Securities.

"There is always a possibility that the reserves will be used.

The fact that there is a big wad of cash sitting in the
reserves is something that obviously the market finds comforting,
although I don't think it should," he said.

Central Bank governor Chatu Mongol Sonakul said Thailand
should legislate to give it more flexibility to deal with sick
financial institutions before it started to repay the IMF loans.

He said this would boost market confidence in Thailand and
help the baht. He also suggested any IMF repayment should be made
after concerns about the so-called Y2K computing bug subsided.