News Brief: IMF Executive Board Completes Third Review of Thailand’s Economic Program; Next Loan Tranche Released

June 10, 1998

IMF Executive Board Completes Third Review of Thailand’s Economic Program; Next Loan Tranche Released

Michel Camdessus, Managing Director of the International Monetary Fund (IMF) said: "I am pleased to announce that the Executive Board of the IMF today completed the 1998 Article IV consultation with Thailand, and, at the same time completed the third review under Thailand’s stand-by credit with the IMF. In completing the review, a further tranche of about US$133 million was released under the credit, bringing total disbursements so far to about US$2.799 billion. There was recognition of the considerable achievements made so far under the economic program, which has helped to rebuild the confidence of financial markets in Thailand’s economy. Despite difficult regional conditions, the balance of payments outlook has improved markedly, international reserves have been substantially replenished, and the exchange rate has strengthened significantly since the start of the year.

"Even so, the performance of the real economy is proving weaker than anticipated, and this necessitates a rebalancing of macroeconomic policy. The fiscal deficit for 1997/98 will be widened from 2 to 3% of GDP, to allow for the effect of the recession on tax revenues and help strengthen the social safety net; monetary policy will continue to center around the goal of broad stability of the effective exchange rate; and the process of restructuring the financial sector will be intensified. The authorities are encouraged to complement these critical measures with forceful implementation of supportive structural reforms. These include amendments to the Bankruptcy law and to foreclosure procedures, improvements in conditions for foreign direct investment, and the removal of barriers to corporate restructuring. These structural measures will facilitate the necessary economic restructuring, secure efficiency gains, and help revive longer term capital flows to Thailand.

"The authorities are to be commended on the substantial progress they have made in structural reform and economic stabilization, but considerable risks still lie ahead, as shown by the recent turbulence in financial markets. The complex task of financial and corporate restructuring has yet to be completed, and regional economic prospects remain difficult. Based on the achievements to date, the Executive Board expressed confidence in the Thai authorities’ resolve and ability to meet these difficult challenges," Camdessus said.


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