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Sat, Aug 02, 2003 - Page 12 News List

Thailand's PM declares nation debt-free


Prime Minister Thaksin Shinawatra declared Thailand free of its debt to the International Monetary Fund (IMF) Thursday, after a final repayment was made two years ahead of schedule.

In an address to the nation, Thaksin said the last installment of 60 billion baht (US$1.43 billion) was made to the IMF and the Bank of Japan.

"We are now free from the commitment that we made to the IMF," he said.

After the regional economic crisis hit in 1997, Thailand was granted an IMF financial package worth US$14.5 billion, eventually drawing down US$12.9 billion from the fund, the premier said.

"We now have sufficient foreign currency reserves. Thus, there is no need to keep the debt. We are confident that the country is strong enough," he said.

Thailand's economic independence means the government may now implement policies that are "suitable and right and will benefit our people," Thaksin added.

The payoff means that some of Thailand's commitments to the international lender have been jettisoned, including a proposal to raise the Value Added Tax rate to 10 percent from 7 percent.

The government will also amend 11 economic bills issued during the economic crisis, he said Thursday, including changes to the bankruptcy bill and state-enterprise law.

In a snapshot of the economy, Thaksin said he was confident that GDP growth would reach 6.0 percent this year.

"I'm still confident that GDP growth this year will reach 6.0 percent as targetted. If not, GDP will still be higher than 5.5 percent," he said.

The central Bank of Thailand raised this year's growth forecast to 4.5 percent to 5.5 percent from 3.5 percent to 4.5 percent Wednesday, citing strong first-quarter expansion and lower interest rates.

In January, Thailand announced plans to repay its then-outstanding US$4.8 billion of debt to the IMF in three installments by the end of last month.

With Thailand's economy on an upswing, the government decided it would send a positive message to foreign investors by clearing the outstanding debt.

Under the original schedule of the rescue package agreed to by Thailand during the Asian financial crisis of 1997 to 1998, payments to the IMF were to have been completed in May 2005.

Analysts said the early repayment was a psychological factor but would have a negligible impact on the economy.

Sompop Manarangsan, an economics lecturer at Bangkok's Chulalongkorn University, said its main significance was its effect on the country's image.

"The image may be better in terms of Thailand independently running its monetary policy, and macro [economic] policy can become more flexible for the Thai government," he said.

"But to increase the competitiveness of the economy, particularly for the private sector ... restructuring and reform by both the government sector and private sector is much more important," he said.

Both the domestic and international economies had already absorbed the news earlier this year, he said.

"But it may play some role for raising domestic confidence, particularly for investors here in this country."

Kasikorn Bank Research Center, a private think tank, said the repayment would have "very little impact on the country's foreign reserves and currency movement" and urged the government to stick to a program of reform.

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