Thailand 'wont' follow Jakarta debt freeze'

Thailand 'wont' follow Jakarta debt freeze'

BANGKOK (Reuters): Thailand is unlikely to follow Indonesia's path in freezing debt repayments, analysts and economists said yesterday.

Although the wobbly baht remains under pressure and has lost more than 50 percent of its value since last July, the Thai currency has recently been more stable.

Other positive factors were Thailand's sweeping financial reforms and strict adherence to an International Monetary Fund program linked to a $17.2 billion bail-out package, they said.

In addition, a relatively more stable Thai political situation than in Indonesia and a healthier debt to foreign reserves ratio were seen as other key elements that would keep Thailand's path divergent from Indonesia's.

"It is far more unlikely (for Thailand). One reason is that the currency has not gone as far as (the rupiah) has. There is much more stability in terms of the government here," said Russel Kopp, head of research at Dresdner Kleinwort Benson in Bangkok.

"To me, Indonesia is in a period of near anarchy. It's decidedly different. The other thing is, Thailand today has done reasonably well IMF-wise. And there is some hope or optimism that Thailand can be first in, first out (of the crisis)," he said.

Indonesia said on Tuesday its debt-ridden companies would temporarily halt repayments to allow time for new debt servicing arrangements.

A key reason for the temporary debt freeze was the rupiah's plunge to around 11,000 per dollar now from 2,400 in July. The country's total debt is estimated at $140 billion, of which corporate debt is put at around $66 billion.

Arporn Chewakrengkai, economic adviser to Thai Prime Minister Chuan Leekpai, said that Thailand was in a stronger position because its proportion of foreign debt to reserves was better. "Indonesia's foreign debt is about $140 billion but its foreign reserves are just $20 billion," she said.

"Thailand also suffers a debt crisis but our foreign reserves stood at around $27 billion at end December while the total foreign debt was only around $90 billion," she said.

Analysts agreed that so far Thailand had moved in the right direction and made impressive progress in solving its problems, although much still needed to be done.

Commercial banks have been ordered to recapitalize heavily to strengthen their financial base and to bring in fresh capital. The current account has moved into surplus in recent months, evidence that Thailand's austerity measures have started to show positive results.

Sluggish demand has dented imports and the weaker baht has boosted exports. The Bank of Thailand expects the positive trend to continue.

The favorable current account outlook is expected to help take pressure off the baht.

But despite signs of improving prospects, some analysts cautioned that the time was not ripe yet for rejoicing.

"The baht remains Thailand's most vulnerable point due to the foreign debt overhang. There are big (forex) forward positions that Thailand will have to settle soon," said an economist at a European bank.

"But the outlook for a debt-rollover appears more encouraging. From now until March would be one of the most challenging periods. If you survive it, the prospect for any debt repayment freeze or moratorium will be even far more remote," he said.