Rescue package insists on immediate action to implement sweeping reforms

The strategy devised by the International Monetary Fund (IMF) to rescue the Thai economy calls for immediate action to reform fiscal and monetary policy and warns about the dangers of ignoring the advice.

According to an IMF statement, among the key measures demanded are accelerated privatisation and mergers, cuts in government spending and increased value-added tax.

Although the plan includes demands for these long-term structural changes, it also lays out measures to slash the current account deficit and the inflation rate by the end of next year.

An IMF spokesman in Washington said that central to the strategy was 'the separation, suspension, and restructuring of unviable institutions', a reference to the banking system which is on the verge of collapse under the weight of non-performing loans.

'The success of the programme hinges crucially on isolating insolvent institutions and ensuring the viability of those remaining through early recapitalisation and strengthened regulatory requirements and supervision,' the spokesman said.

The plan was accompanied by a stern warning about the consequences of not heeding the advice.

'There are risks to the realisation of the programme's objectives. In particular, strong resolve will be required to sustain the fiscal adjustment and implement the necessary financial sector restructuring in the face of a slowing economy,' the fund said.