Struggling Thailand Seeks Easier I.M.F. Terms
By SETH MYDANS
BANGKOK,
Thailand -- The New Year began on a dark note Monday as Thailand announced
that it
would ask the International Monetary Fund to ease the terms of its $17.2
billion bailout
package
and as its currency, the baht, fell to a new low of less than half its
value last summer.
Prime Minister
Chuan Leekpai said Thailand would seek to soften an IMF requirement that
it produce
a budget surplus
this year. He cited the weakening currency and worsening economic situation
since
the package
was agreed to five months ago.
"We have cut
spending substantially but shortfalls in revenue will be as high as 100
billion baht, which
makes it important
to adjust the plan," he said.
Akapol Sorasuchart,
a government spokesman, said that Thailand would not be asking for any
additional funds
from the IMF.
The prime minister's
bad tidings were underscored when the Thai currency dropped for the first
time
though the psychological
barrier of 50 to the dollar -- down from about 25 to the dollar when the
government was
forced to let it float last July. It was quoted in midmorning at 51.05
to the dollar before
recovering slightly
in the afternoon.
The IMF package,
agreed to in August, was based on the projection that the baht would stabilize
at
about 32 to
the dollar.
The weakening
currency has made it sharply more expensive for Thailand to service its
huge overseas
dollar debt,
Akapol said. In addition, he said, the slower economy has reduced tax collections,
making it
harder to produce
a budget surplus.
Thailand's recovery
has also been hampered by the spreading downturn throughout the region,
which
has reduced
foreign investments and cut into the competitiveness of the cheaper baht.
As markets opened
Monday after the New Year's break, currencies around the region -- in Indonesia,
Malaysia and
the Philippines -- joined the baht in hitting record lows. The Malaysian
ringgit fell for the
first time past
the level of four to the dollar and the Philippine peso fell for the first
time past 40 to the
dollar.
In Tokyo, the
yen dropped to its lowest level against the dollar since May 1992, trading
at 132.84 to the
dollar.
"We have all
been predicting that 1998 would be a tough year, and it isn't taking long
for our predictions
to come true,"
a Western financial analyst said. "The falling currencies are just going
to make
everything more
difficult."
The Asian economic
crisis began with the devaluation of the Thai baht and quickly spread to
the
currencies and
stock markets of other nations. Both Indonesia and South Korea have received
huge
rescue packages
from the IMF but their economies, like Thailand's, have continued to worsen.
Economists say
they expect to see widespread unemployment, bankruptcies and possible social
unrest
this year as
growth rates plummet and governments institute austerity measures.
Chuan took office
last November after the fall of a previous government that had failed to
address the
worsening economic
situation. He has been widely praised for beginning to institute austerity
measures,
but these measures
could arouse a political backlash.
Last week, Thai
labor unions threatened mass protests if the government failed to take
concrete steps
to control unemployment,
which economists predicted could reach two million by the end of the year.
An attempt by
the previous government to close the budget deficit by raising fuel prices
aroused a
public outcry
and was withdrawn after just three days.
Chuan said Monday
that he would send Finance Minister Tarrin Nimmanahaeminda to Washington
this
month to ask
the IMF to ease its requirement that Thailand produce a cash surplus equal
to 1 percent
of its gross
domestic product in the fiscal year ending in September.
"The premises
on which the terms were based have changed, and we will ask if the IMF
has a plan to
review it,"
he said. "We have cut spending substantially, but shortfalls in revenue
will be as high as 100
billion baht,
which makes it important to adjust the plan."
In a review of
the rescue package two months ago, the IMF already took account of the
worsening
economy, adjusting
Thailand's required growth in 1998 to between 0.0 percent and 1.0 percent,
from its
initial requirement
of 3.5 percent. Until the economic crisis hit this year, Thailand's economy
had been
growing at an
average of about 8 percent a year for the last decade.
Last week, Tarrin
said even the new, lower target could not be met. He projected for the
first time that
the Thai economy
would shrink this year, estimating a negative growth rate of about 0.7
percent.
Thailand has
been struggling to meet the requirement for a cash surplus and has already
cut its 1998
budget three
times this year, to 800 billion baht, from 982 billion baht.
Austerity measures
have been instituted, including pay cuts for politicians and senior civil
servants and
reduced spending
on military equipment. The value-added tax has been increased on all goods
and
services and
excise duties have been raised on a variety of imported luxury goods and
automobiles.
But the unchecked fall of the currency has made a budget surplus a continuously receding mirage.
In a year-end
assessment last week, Chuan said that if conditions were favorable, the
economy could
begin to recover
by the third quarter of 1998. He said his view was based in part on predictions
that the
baht would stabilize
at about 35 to the dollar.
But the central
bank governor, Chaiyawat Wibulswasdi, in a separate assessment, said the
economy
could hit bottom
in the third quarter. He said he based his view on predictions that the
baht would
stabilize at
about 40 to the dollar.