Thailand will complete its debt repayment under the IMF rescue fund by January. (One year ahead of schedule mind you).
This another lesson on how "handouts" by tax payers are repaid back, principal and interest. Next time there is a financial crisis in any part of the world, just relax and "hand out" the cash.
IMF LOAN: Mixed signals over repayment
Published on Aug 27, 2002
The Bank of Thailand's assistant governor, Tarisa Watanagase, yesterday confirmed Prime Minister Thaksin Shinawatra's statement over the weekend that Thailand will complete its debt repayment under the IMF rescue fund by January.
In doing so, Thailand will becomes the second country from the Asian financial crisis after Korea to clear its debt, and will do so more than a year ahead of schedule.
But central bank Governor Pridiyathorn Devakul yesterday said he would only make the decision to repay the loan ahead of time after uncertainties in the global financial markets pass.
"We might or might not make early repayment," he said.
But Tarisa had earlier said that the central bank "intends to clear the debt early, as there is more than enough international reserves to do so".
" The central bank has already planned early repayment from inflow and outflow figures in the reserves," the deputy said.
Tarisa did not reveal the specific timing for early repayment. Thailand drew US$14.3 billion (Bt605 billion) from a $17.2-billion credit line given by the IMF.
It had started paying back the debt from the fourth quarter 2000 and now has outstanding debts of $6.5 billion, of which about $1 billion is owed to the IMF and the remaining amount to other central banks and international financial institutions.
Thailand's international reserves were placed at $38.2 billion as of August 16, representing about six-month's worth of imports.
Thaksin said Thailand would have about $28 billion to $30 billion in foreign reserves after paying off the debt.
Market watchers say it is the right time to pay off the debt, as it will restore confidence among foreign investors, adding that it is unlikely to benefit Thailand's credit rating.
"This could be viewed in two aspects. It is positive as early repayment reflects that we have a healthy financial position," said Aran Thammano, a member of the Monetary Policy Committee. "However, the amount is small and I don't think it would be of much help [in improving Thailand's credit rating]. If we had done it a year or two ago, it would have been more significant."
Thanomsri Fongfarungrung, an economist at Merrill Lynch Phatra Co Ltd, agreed, saying the high levels of foreign reserve provided Thai authorities enough flexibility to repay the debt early. Such a move would allow the country to save on interest payments.
Thailand's short-term debt is running at only $13 billion.
However, it would not benefit the country's credit rating.
Thanomsri said Standard & Poor's had earlier said the country's external stability had not been a concern for a while. However, the agency said when it upgraded Thailand's outlook from stable to positive, that the country was still at risk from its bad loans in financial institutions, as well as pressure from fiscal sustainability.
Sansern Samalapa, a Democrat Party member, yesterday said early repayment was not significant as the portion of remaining debt is small and has long been planned for repayment.
But Chavalit Thanachanan, chairman of the Stock Exchange of Thailand, said earlier repayment would signal that Thailand was ready for economic expansion. This would draw the attention of foreign investors. It was also unlikely to affect the country's foreign exchange rates, he said.Anoma Srisukkasem,
Siriporn Chanjindamanee,
Jiwamol Kanoksilp
The Nation
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Repayments to IMF: Summary of Thailand's debt obligations:
- US$17.2-billion stand-by arrangement ended June 2000
- Total amount drawn down, US$14.3 billion
- Total debt outstanding: $6.5 billion (of which $1.16 billion owed to IMF)
- Foreign reserves as of August 16: |$38.2 billion
- Started repayment: 4th quarter of 2000
- Early repayment expected: January 2003
- Last scheduled repayment to the IMF: |2nd quarter of 2004
- Last scheduled repayment to central banks: 3rd quarter of 2004
- Last scheduled repayment to Japan Export and Import Bank: 2nd quarter of 2005 |
