Copyright 2000 Deutsche Presse-Agentur

Deutsche Presse-Agentur

June 15, 2000, Friday, BC Cycle

09:11 Central European Time

HEADLINE: IMF ends programme in Thailand amid worries about corporate debt Senior executives at the International Monetary Fund (IMF), which ends its bailout programme for Thailand this weekend, on Thursday cautioned that the country must continue its reforms, especially in the area of corporate debt restructuring.

"Overall we are very pleased with the progress Thailand has made over the past three years," Ranjit Teja, IMF's division chief on Asian and Pacific Department, told a news conference.

In August 1997, Thailand signed a bailout agreement worth 17.2 billion dollars with the IMF after blowing its foreign reserves in an unsuccessful bid to prop up the Thai baht currency that led to a collapse of the domestic financial system.

After borrowing 14.3 billion dollars from the fund and three years of heeding IMF advicee on macroeconomic management, monetary policy, restructuring its banks and large corporations, the programme will officially end on June 19. While the IMF expressed confidence in the recovery of the Thai economy, which is expected to grow by 4.5 to 5 per cent this year, it noted that "more needed to be done in many areas, most importantly in corporate debt restructuring and the mirror image of that which is the restructuring of the banks," said Teja.

Teja said a strong export performance and rising local consumption would prove the dual engines of Thailand's economic recovery this year and in years to come, but the country's long-term prospects remain clouded with unsettled corporate debt amounting to an estimated 2 trillion baht (51.3 billion dollars).

"Companies are only going to be in a position to increase investment once their debt has been restructured," Teja said.

Although Thailand's public debt has shot up to nearly 60 per cent of its gross domestic product this year, the IMF was less concerned about that than corporate debt.

"We don't perceive this to be a major problem, but this assumes that the government will take the hard decisions needed over the next three to four years," said Teja.

He advised the government to gradually reduce its fiscal deficits and improve its tax collection system, while tightening up laws on bankruptcy procedures.

"A number of things have been done in dealing with the framework for dealing with corporate debt restructuring, and more things need to be done with the court system and getting rid of certian loopholes," said Carl-Johan Lindgren, IMF's senior advisor on financial sector issues.

By 2001, the Thai banking system will be back to profitability, Lindgren predicted. Over the past three years Thailand has changed its bankruptcy law and established a central bankruptcy court which is already clogged with pending cases.

While acknowledging that the government of Thai Prime Minister Chuan Leekpai has had a good working relationship with the IMF, Teja implied that the reform process had been slowed by Thailand's pending general election, which must be held before this November.

"What we would be comfortable with, is that whatever government is in power is able and willing to implement a change in policy quickly," said Teja. dpa pj wp