Thailand asks IMF for room to maneuver

Thailand asks IMF for room to maneuver

LONDON: The Thai government has asked the International Monetary Fund (IMF) to relax its tough prescription after admitting that the aftermath of the Asian crisis will squeeze the country's economy more than initial estimates suggested.

The government says that the economy may shrink by as much as 5.5 percent in 1998, compared with an earlier forecast of 3.5 percent.

It wants to increase public spending on anti-poverty programs to soften the impact and has asked to run a higher public sector deficit than agreed in the bail-out deal with the fund last year.

This week the government passed four emergency decrees to raise revenue to help restore the battered financial sector, but critics said they amounted to a bail-out for the rich.

In response to the criticism, the government announced a 25 billion baht (about US$620 million) supplement to the budget for job creation and poverty alleviation.

Citing the "sharper than expected" deterioration in the country's economic health, the letter to the IMF asked for a relaxation of the terms of the promised reforms. It asked the IMF to permit a budget deficit equal to 3 percent of Thailand's gross domestic product in fiscal 1998, up from 2 percent.

It also said it would seek a "cautious reduction" in interest rates if the Thai baht stays stable for the remainder of the year.

Some economists have contended the high-interest, tight-money policy is harsh and stifles the growth that might lead to recovery.

Thailand was the first Asian country to be hit by the financial crisis which swept through the region almost a year ago.

Speculators began attacking the baht in May last year and in early July the government was forced to break its peg to the dollar, setting off a wave of currency depreciations amongst its Asian neighbors.

The massive devaluation has failed to stimulate exports which were expected to help drive the economic recovery. Tuesday's forecast says exports will grow only 1.4 percent in dollar terms, compared with an initial estimate of 6.2 percent.

Unemployment is expected to rise to more than 2 million this year, more than 60 percent up on a year earlier.

-- Guardian News Service