Thanong reaffirms obligation to rescue package
Thai Finance Minister Thanong Bidaya says his government remains committed to an economic reform programme under a US$17.2 billion IMF-arranged rescue package.
On the same day the IMF gave full marks to Thailand for implementing the tough adjustment plan and predicted the baht would rebound.
IMF first deputy managing director Stanley Fischer said the IMF-imposed programme was being implemented 'extremely rapidly'.
'Let [them] get some respect on the speed with which the authorities are moving,' he said, noting that the programme was less than two months old and considerable progress already had been achieved.
'With the implementation now set to proceed to the next stage . . . we are confident the markets will come to realise the strength of this programme and the determination of the authorities to restore the health of the economy,' Mr Fischer said.
The rescue deal was drawn up after the collapse of the baht when it was floated on July 2.
Mr Thanong said: 'There is full political consensus on these issues and there should be no further doubt, or question about the direction we are determined to move.' He said he wanted to 'restore the full confidence' of domestic and international investors. Thailand would return to long-term sustainable growth within three years.
Mr Thanong said in the medium term he aimed to improve the competitiveness of Thai exports and cut the current account deficit from 8 per cent in 1996 to 5 per cent this year and 3 per cent next year.
Thailand has taken steps to meet the financial criteria of the IMF programme with the approval of a budget reduction and the implementation of a higher value-added tax.
The hard part - the financial sector - remains to be dealt with.
In a package to be announced on October 15, Thailand will reveal details on how the financial sector will be strengthened, and the fate of 58 suspended financial institutions.
'The problems of financial-sector rehabilitation are a major concern,' Mr Thanong said.
'We regard our present difficulties as offering the opportunity to solve the fundamental problems of the system in a transparent way so that it can better manage the risk and rewards of large capital inflows.' Regaining the confidence of depositors, creditors and investors would be the first plank of the plan.
The plan would also seek to restore the solvency, profitability and liquidity of the broader financial system.
Limits on foreign participation would be liberalised to broaden sources of capital, creditors would take losses in the suspended finance companies and strict criteria would be applied to reviving them, he said.