Thailand not to seek easing of IMF conditions

Thailand not to seek easing of IMF conditions

BANGKOK (AFP): Premier Chuan Leekpai has vowed Bangkok would not seek an easing of its IMF bailout conditions, despite Thai currency and stock markets receiving another beating, a report said yesterday.

Chuan said Thursday his government would not ask the International Monetary Fund (IMF) to soften the terms of the economic bailout package granted in August, the Bangkok Post reported.

"The IMF has admitted that they misinterpreted the actual situation affecting Thailand. Nevertheless, we do not find it necessary to change the IMF conditions for the time being," the paper reported Chuan as saying.

Chuan gave his assurance to parliament yesterday amid speculation from opposition parties that the government would seek a softening of the IMF conditions.

Analysts have said international investor confidence in Thailand relies heavily on the country's strict adherence to conditions attached to the IMF-led 17.2 billion dollar package.

Efforts to ease hardships by seeking a relaxation of the terms would send the wrong signal to the international community, denting confidence further.

Chuan's assurance came amid a fresh wave of turmoil in Asia's currency and stock markets which sent the Thai baht to historic lows in the first few minutes of trade this morning.

The baht dropped to 44.75-95 to the dollar in the first few minutes of trade Friday, pulling back only slightly before plunging further to 44.95-45. 05 by late morning after central bank intervention.

Thai share prices dropped 1.8 percent in the morning, recovering later to 0.3 percent below Thursday's close.

Analysts have blamed further collapses in the Thai markets on turmoil in South Korea resulting in a drastic weakening of the won.

Chuan and his so-called economic "dream team" vowed after he was appointed last month to begin tackling the key problems fast and diligently to restore confidence and boost liquidity in the financial sector.

He and his team have vowed they would adhere to the stringent targets and conditions of the rescue, despite the fact that the program will bring a period of biting austerity for Thailand.

Fears had been raised in the financial community that the previous Thai government did not have the will or the ability to fully implement the IMF conditions, which include strict macroeconomic targets.

Under its bailout, Thailand must produce a budget surplus of one percent of gross domestic product in 1998, keep its current account deficit in check and move fast to restructure the crippled financial sector.

The sector, groaning under the weight of more than $35 billion in bad debts, was the object of a tough crackdown on Monday when the authorities shut down all but two of 58 suspended and technically bankrupt finance firms.

The IMF conditions have forced Bangkok to slash its fiscal 1998 budget by 162 billion baht to 800 billion baht ($17.8 billion) over the last two months in a bid to meet the budget surplus requirement.

The move has led to a tough period of official belt tightening and will undoubtedly mean rising unemployment.

Analysts have said however that the worsening economic situation and a realization of the seriousness of Thailand's problems has meant that some of the conditions will be very difficult to meet.