Finance Minister Resigns Post,
Prompting Drop in Baht, Stocks

An INTERACTIVE EDITION News Roundup

Thailand's Prime Minister Chavalit Yongchaiyudh named himself temporary finance minister Thursday after his finance and commerce ministers quit in a shakeup that has deepened worries about his stewardship of the economy.

The Thai currency plunged to its weakest level against the dollar in 12 years following news of the resignations, hitting 26.580 baht -- nearly 10% lower.

Stock prices plunged a further 3.8% Thursday following Finance Minister Amnuay Viravan's resignation as investors panicked over who would succeed him.

Mr. Chavalit said Thursday his government will stick to the economic policies formulated by Mr. Amnuay, including a vigorous defense of the country's exchange-rate system.

"I want to insist that the government will solve the economic problems," said Mr. Chavalit, who said a new minister will be appointed Friday. "The new finance minister will continue Amnuay's policies."

Thailand's economy has been in decline since mid-1996, with exports showing no growth, banks and finance companies in trouble over imprudent lending to property developers, and a stock market slump.

Mr. Chavalit won election in November promising to appoint a "dream team" of five skilled technocrats to key ministries.

One member of the team, Mr. Amnuay, announced he would resign on Wednesday after the prime minister insisted on rolling back excise taxes that Mr. Amnuay said were essential to balancing the budget.

"I don't want to work in an environment of conflict, which is not good for the political stability of the country," Mr. Amnuay said.

Commerce Minister Narongchai Akrasanee quit on Thursday.

"We came in together, so we have to leave together," said Mr. Narongchai, a protege of Mr. Amnuay and one of two prominent businessmen asked to join the Cabinet in December.

Mr. Chavalit's decision to take the reins at the Finance Ministry was announced by Interior Minister Snoh Thienthong, who said it was "to preserve the stability of the government." Mr. Chavalit is also defense minister.

Analysts said that the departures suggest Thai economic policy could be cast adrift at a particularly dangerous moment.

Some economists say Thailand could face its first recession in more than 30 years in 1997 or 1998, and bankers are increasingly warning of a possible collapse in the country's financial system.

"We're getting closer and closer to the abyss," said Neil Saker, an economist with SocGen-Crosby.

Investors were nervous about Mr. Chavalit's search for a permanent replacement for Mr. Amnuay, and some said his decision to temporarily take the post himself reflected the difficulty in finding a replacement that would please all factions of the government.

In the six months he was finance minister, Mr. Amnuay pushed the government to cut expenditures, lobbied banks to cut interest rates, and drafted a 100-billion baht bailout package for the country's cash-strapped property developers and their lenders. He also backed, at least in public, the central bank's policy of keeping the baht stable versus the dollar.

None of those measures, however, was sufficient to stop the economy from declining and the troubles of the financial system from deepening. Mr. Amnuay proved unable to muster government support for more severe measures needed, including letting some financial institutions fail, loosening the exchange-rate system, and tripling expenditures to bail out property companies.

"Mr. Amnuay tried very hard to solve [economic] problems but still he hasn't fixed some of them," Mr. Chavalit said. That prompted Mr. Amnuay to resign out of a sense of accountability, Mr. Chavalit said. "He resigned to show political spirit and to create an opportunity for a reshuffle" that would allow another person to tackle the problems, Mr. Chavalit said.

Mr. Chavalit said he tried to talk Mr. Amnuay out of resigning, but the finance minister couldn't be persuaded.

Mr. Chavalit said he would seek an audience with King Bhumibhol Adulyadej Friday to appoint a new finance minister. He declined to say, however, who he would name and said he wouldn't rule out naming a person outside his ruling coalition.

Government officials have said the short-list of candidates to replace Mr. Amnuay includes Pridiyathorn Devakula, president of the Export-Import Bank of Thailand, and Thanong Bidaya, president of Thai Military Bank PCL. Other candidates cited were Olarn Chaipravat, president of Siam Commercial Bank; and Virabongsa Ramangkura, a former finance minister who oversaw the country's baht devaluation in 1984. The last two candidates, however, are considered long shots, according to analysts.

"It's imperative that he appoint a credible person as finance minister who will have the authority to do the two things that are necessary," said Nikhil Srinivasan, a vice president at Morgan Stanley in Bangkok. "One, to immediately undertake financial-sector reform; and two, to introduce policy measures to bring down real interest rates, even if that involves an adjustment of the currency system."