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What is the IMF?
The IMF is a specialized agency of the United Nations system set up by treaty in 1945 to help promote the health of the world economy and prevent crises in the international monetary system. Headquartered in Washington, D.C., it is governed by its almost global membership of 183 countries.
The IMF's statutory purposes include promoting the balanced expansion of world trade, the stability of exchange rates, the avoidance of competitive currency devaluations, and the orderly correction of a country's balance of payments problems. To serve these purposes, the IMF:
- monitors economic and financial developments and policies, in member countries and at the global level, and gives policy advice to its members based on its more than fifty years of experience.
- lends to member countries with balance of payments problems, not just to provide temporary financing but to support adjustment and reform policies aimed at correcting the underlying problems.
- provides the governments and central banks of its member countries with technical assistance and training in its areas of expertise.
Thailand and the IMF
- Thailand joined the IMF on May 3, 1949. ·
- Thailand’s quota in the IMF amounts to about US$1,360 million, or 0.51 percent of total quota. Thailand’s voting power in the IMF is 11,069 votes or 0.51 percent of total.
- Thailand accepted the obligations of Article VIII of the IMF Articles of Agreement on current account convertibility on May 4, 1990.
- Thailand’s Governor in the IMF is the Governor of the Bank of Thailand.
- Thailand subscribes to the IMF’s Special Data Dissemination Standard. Countries belonging to this group make a commitment to observe the standard and to provide information about their data and data dissemination practices.
Financial Assistance
- Since 1978, Thailand has used IMF resources in support of the Government’s economic and financial programs on five occasions. The last occasion was on August 20, 1997, when the IMF’s Executive Board approved a stand-by credit of about $4 billion in support of a 34-month adjustment program.
- Total Fund credit and loans outstanding at end-July 2001 amounted to about $2.6 billion.
- Technical Assistance
- The IMF has provided Thailand with technical assistance, including through the provision of resident advisors, in the areas of tax policy, legal framework, financial system, balance of payments, money and banking, and statistics. Since 1981, the IMF Institute has provided training to Thai officials in financial analysis and programming, public finance, government finance statistics, balance of payments methodology, and other areas. In addition, Thai officials have attended IMF seminars in areas such as trade policy issues, budgeting and expenditure control, balance of payments management, and current legal issues affecting central banks.
IMF Assistance to Thailand during the Asian Financial Crisis
In response to a series of speculative attacks against the pegged exchange rate regime for the baht, and a loss of confidence in the economy, on August 20, 1997, the IMF's Executive Board approved financial support for Thailand of up to US$4 billion, over a 34-month period. The total package of bilateral and multilateral assistance to Thailand came to US$17.2 billion. Thailand drew US$14.1 billion of that amount (of which $3.4 billion from the Fund) before announcing in September 1999 that it did not plan to draw on the remaining balances, in light of the improved economic situation. The stand-by arrangement expired on June 19, 2000. Scheduled repayments began late in 2000 and, through mid-2001, had amounted to US$1.6 billion (of which about half was to the Fund).
In the early stages of the program, the Thai authorities adapted monetary policy to a managed float of the baht; fostered the restructuring of distressed financial institutions; enacted budget cuts to free up resources to help finance the restructuring of the financial sector and to support improvement in the current-account position. The rapid spread of the Asian crisis in late 1997—bringing a larger-than-expected depreciation of the baht, a sharp economic downturn and adverse regional economic developments—warranted revisions to the Thai program. The revisions were undertaken through a series of program reviews conducted in close consultation with the Thai authorities. In the context of a recession, whose severity was unforeseen, they aimed to restore economic growth, ensure the continued restructuring of the Thai economy, and protect those elements of society most vulnerable to the economic downturn.
Monetary policy focused on both supporting exchange-rate stability and fostering an economic recovery. As the baht began to steady, the Thai authorities reduced interest rates. By mid-1998, money market interest rates began to approach pre-crisis levels, and first deposit, and then lending rates, started to drop as well. By September 1999, money market rates reached their lowest levels in over a decade. Fiscal policy shifted in the face of the economic slowdown. While the first letter of intent called for a government budget surplus equal to 1 percent of GDP in 1997/98, beginning in February 1998 the program began targeting fiscal deficits, which peaked in 1998/99 at over 6 percent of GDP (including interest costs of financial sector restructuring). Much of the increased spending focused on boosting social safety net programs to ensure the protection of Thais affected by crisis. While fiscal stimulus remains important for the time being, over the medium term, fiscal consolidation will be needed to reverse the rise in public debt.
Financial sector restructuring has remained a key policy area throughout the Thai program. In the early stages, the program concentrated on the liquidation of insolvent finance companies that had been closed, government intervention in the weakest banks, and the recapitalization of the banking system. In 1998, the reform effort accelerated, with a focus on privatizing the intervened banks, disposing of assets from the finance companies, and measures to facilitate the voluntary restructuring of corporate debt. The authorities made great strides by strengthening the institutional framework, including through the reform of the regulatory framework for bank supervision, the bankruptcy act, foreclosure procedures and foreign investment restrictions.
As a result of these efforts, significant progress has been made over the past few years in stabilizing the economy and fostering an economic recovery. Thailand's economy returned to positive growth in late 1998, and GDP growth reached over 4 percent in 1999 and in 2000. External vulnerability has been substantially reduced as a result of the large payoff of short-term external debt, and official reserves have been rebuilt to over $30 billion. Private banks have raised almost US$10 billion in new capital, and bank profitability has recovered. Moreover, Thailand has emerged from the crisis with two-thirds of its banking system in private hands. Non-performing loans, however, still remain at a high level, underpinning the need to accelerate corporate debt and bank restructuring.
The latest IMF Executive Board assessment of Thailand’s progress in emerging from the crisis was published in August 2001 (Public Information Notice, August 16, 2001), including a set of studies on key aspects of the structural reform and macroeconomic policy agenda.
The IMF in Thailand
The Office of the IMF Resident Representative to Thailand was established in December 1997. The Office activities are aimed at fostering a good relation between the Thai authorities and the IMF, and maintaining the IMF headquarters in Washington, D.C. abreast of economic, financial and political developments in Thailand.
Within the broader surveillance mandate of the Fund, the Office has an important role in ensuring continuity in the Fund’s dialogue with Thai policymakers on the national and international repercussions of their economic and financial policies and reforms. To facilitate this dialogue, the Office of the Resident Representative organizes regular consultations between the Thai authorities and the Washington-based IMF staff team overseeing Thailand. These consultations focus mostly on macroeconomic and structural policies that have a bearing on external viability.
The Resident Representative Office is also responsible for facilitating the provision of IMF technical assistance to Thailand, and ensuring that the assistance is as timely and as responsive to Thailand’s needs as possible. The Office also promotes the attendance of Thai officials in seminars and training courses offered by the IMF Institute in Washington, D.C. and Singapore.
Being the IMF first point of contact with the general Thai public, the Resident Representative Office engages in various external relations activities with the aim of deepening understanding of the IMF in Thailand. The Resident Representative participates regularly in seminars, lectures, and other informal gatherings to explain Fund policies and views on economic and financial issues. In addition, the Office maintains close contact with financial market participants, the academia, non-governmental organizations, other multilateral organizations based in Thailand, and the press.
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