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Thailand to repay US$1 billion IMF loan a year early

Thailand will pay the last US$1 billion it owes the International Monetary Fund in January, a year earlier than terms of the 1997 rescue loan require, Prime Minister Thaksin Shinawatra said.

The early payment may boost investors' appetite for Thailand's securities as it prepares to sell US$1 billion of global bonds in October, its first such sale since its decision to float the baht in 1997 triggered the Asian financial crisis.

Since then, Thailand has cut its foreign-currency debt by about a third and taken other steps to rehabilitate its economy, which has grown at an average rate of about 4 percent since 1999.

The move will "help boost investors' confidence in Thailand's loan-repayment ability," said Usara Wilaipich, an economist at Standard Chartered Bank in Bangkok. "Thailand's debt-service ability has been improving because the country's foreign-currency debt has come down from as high as US$100 billion to US$64 billion."

The 1997 devaluation crippled companies with foreign-currency debt, which became more expensive to repay. As stock prices and currencies plunged across Asia, the IMF lent Thailand about US$3 billion as part of a US$17.2 billion rescue package involving donors such as Japan, China and Singapore.

Thailand used only US$13 billion and has repaid almost half. Its central bank earlier said it will pay US$2 billion this year.

"The repayment of IMF loans will show the country's ability to repay foreign loans ahead of schedule," Thaksin told reporters late yesterday.

"It will also help reduce interest costs" on the country's borrowings, he said.

Standard & Poor's last week raised its outlook on Thailand's credit rating to positive from stable, citing the nation's growing current-account surplus and improving growth. The change means the credit-rating company is more inclined to raise Thailand's debt rating.

Thailand has had a BBB- long-term foreign-currency rating from S&P, the lowest investment grade, since January 1998.

The central bank on Friday said the country's foreign-exchange reserves stood at a five-year high of US$38.3 billion at the end of last month, as the nation's economic recovery attracts foreign investment and pushes up exports. The reserves were all but depleted in 1997 by the government's failed defense of the baht.

The country has repaid about US$6 billion of the 1997 rescue package to the International Monetary Fund and donor nations, Central Bank Governor Pridiyathorn Devakula said in July.

The plan to repay US$2 billion this year, would leave a balance of US$5 billion to repay in future years, he said.

Thailand's main stock index rose 0.1 percent to 367.29 as of 10:53am in Bangkok.
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