Thailand may be forced 'to seek IMF leniency'

Thailand may be forced 'to seek IMF leniency'

BANGKOK (AFP): Premier Chuan Leekpai warns that Thailand may
be forced to ask the IMF to relax the terms of its rescue package
as the economic slump further erodes state revenues.

Chuan, who has been in power less than two months, admitted
that the economic crisis confronting his government was worse
than he had anticipated when he took office.

"The government might ask the International Monetary Fund
(IMF) to ease its bailout package requirements, particularly that
there be a surplus budget for fiscal 1997-98," Chuan said in an
interview with the Bangkok Post.

He said such a request could come after the IMF releases the
last installment of its portion of the $17.2 billion rescue
package in February.

"To make such demands before the money was handed over might
lead to the IMF refusing to release it, damaging Thailand," the
paper said. "It might also send the wrong message to other Asian
countries borrowing from the IMF."

Bangkok must achieve a budget surplus of one percent of gross
domestic product in fiscal 1997-98 under the IMF bailout, which
Chuan and his economic "dream team" have vowed to respect.

But while Chuan said Bangkok would do its best to meet the IMF
targets, he admitted that the goal was becoming more difficult as
the economic climate worsened.

Adherence to the IMF targets has been seen as crucial to
attempts to restore waning confidence in Thailand's embattled
economy.

Chuan warned Thais they may be in for even harder times in the
form of tax increases to make up for dwindling state revenue.

He said his "biggest concern was that the government may not
be able to collect enough revenue to meet expenditure," despite a
round of three budget cuts which shaved 182 billion baht ($3.9
billion) off the budget for the current fiscal year starting
last September.

"I would like to tell the people straight that, despite best
efforts to increase revenue and to cut spending, if there is
still a revenue shortfall then it might be necessary to have a
tax increase," he said.

Reining in public spending as tax revenues drop has been the
mainstay of government budgetary policy. But the budget is
already pared to the bone to the extent that medium-term economic
growth could be jeopardized.

The premier conceded that balancing the 800 billion baht ($17
billion) budget was "virtually impossible, let alone having a
surplus of some 70 billion baht."

While conceding that the economy was in worse shape than he
had expected when he was appointed last month, Chuan said the
"most shocking thing is about the revenue."

The prime minister also expressed doubts over whether South
Korea would be able to make good its pledge to lend Thailand $500
million as part of the IMF deal. Seoul itself has since been
forced to accept a $60 billion bailout.

He said Indonesia, which had earlier pledged to contribute to
the Thai bailout, had problems which had forced it to seek its
own rescue package.

But the prime minister was optimistic about the future of the
floundering baht, saying the current level was "unrealistically
low."

The baht, which has lost more than 46 percent of its value
against the dollar since its shock flotation on July 2, is now
hovering around the 47 to the dollar mark onshore.

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