Thailand's central bank risks losing half its foreign reserves to meet money market obligations accumulated in its unsuccessful attempts to support the baht, according to a senior International Monetary Fund (IMF) official.
IMF Asia-Pacific director Hubert Neiss said the Bank of Thailand (BOT) could lose between half and two-thirds of US$23.4 billion it has committed to settling forward currency contracts that mature in the next 12 months.
This would work out at between $11 billion and $15 billion. At the end of July, Thailand had $30 billion in reserves.
Mr Neiss said there was little cause for concern as the Thai central bank would be allowed to replenish its reserves by drawing on the IMF-brokered $16.7 billion rescue package and also roll over a portion of the forward contracts it built up on its defence of the baht.
He urged against the BOT making any further heavy interventions.
'When [BOT] governor Chaiyawat Wibulswasdi announced forward liabilities outstanding were $23.4 billion, there was concern this would be a new big hole . . . and that foreign exchange reserves would fall to very dangerous levels. This perception is not correct,' Mr Neiss said.
Not all forward contracts were due at the same time, but were spread over 12 months, which Mr Neiss said would allow the BOT to gradually unwind its positions.