Thailand needs loans to boost foreign reserves

Thailand needs loans to boost foreign reserves

BANGKOK (AFP): Thailand needs an additional US$8 billion in
loans to augment its existing International Monetary Fund (IMF)
bailout package and boost foreign reserves, a report said
Wednesday.

Thailand Development Research Institute (TDRI) president
Chalongphob Sussangkarn said the central bank would need more
money next year to shore up foreign reserves, stabilize the baht
and bolster market confidence in the economy, the Nation
reported.

Chalongphob said the Bank of Thailand's reserves had fallen
significantly despite IMF aid because foreign investors are
selling baht for dollars for fear the reserves will not be enough
to meet the country's huge debt obligations.

The IMF approved a bailout package worth $17.2 billion in
August, to ensure Thailand stays solvent in the wake of the
baht's decline.

The TDRI forecast that $8 billion in additional standby credit
would raise foreign reserves by about $3 billion above official
short-term debt, the newspaper reported.

That in turn would help push up the baht to 42 against the
dollar next year, Chalongphob said. The local currency is
currently hovering at around 47 to the dollar.

The central bank Tuesday said official foreign reserves as of
Dec. 15 stood at $26.9 billion. Thailand's short-term debt
currently stands at $39 billion.

Chalongphob said the government would also need to borrow a
further $1.5 billion to finance ongoing projects due to a
shortage of funds and its bond issues being relegated to junk
status by Moody's Investors Service last week.

He said his call for more funds was "just an option to manage
Thailand's foreign debt. The suggestion needs further study.

"We are not suggesting that this is an absolute answer, but at
least it provides more options on how to mange the macroeconomic
policy."

If the government continues macroeconomic policy according to
the IMF conditions but without additional loans, the baht will
stay at around 47 to the dollar next year, Chalongphob said.

Under the IMF restructuring measures, Thailand should see
foreign reserves in balance with the country's short-term debt
position in 1999, when the economy should register growth of
about 0.1 percent, he said.

But the economy would continue to contract in 1998, with TDRI
projecting a decline of 2.2 percent and the baht continuing to
stay weak against the dollar and other currencies.

Chalongphob said the additional $8 billion would help boost
economic growth over the next two years, with the economy
contracting by only 0.6 percent in 1998 and growing by 0.7
percent in 1999.

TDRI forecast a 1998 current account surplus of $4.72 billion,
or about 3.9 percent of gross domestic product. Borrowing an
additional $8 billion would cut the surplus to $3.55 billion, or
2.6 percent of GDP, the report said.