Thailand Gets Bailed Out: IMF, Asian Neighbors to Contribute $16 Billion
Witter, Willis, The Washington Times (Washington, DC)
TOKYO - With Japan in the lead, Asian nations and the International Monetary Fund yesterday extended a $16 billion line of credit to Thailand to shore up its battered economy.
The loan is the largest effort of its kind since the U.S.-brokered $50 billion bailout of Mexico two years ago.
The package marks Tokyo's emergence as a leader in maintaining the economic vitality of its neighbors, which are suffering a currency crisis spreading throughout Southeast Asia. Japan pledged $4 billion, the largest amount by an individual nation. Australia, Hong Kong and other Asian countries also contributed.
The United States and other Western nations did not pitch in on a bilateral basis but will help finance the deal indirectly through their membership in the IMF and the other international institutions.
Thailand, long one of the region's booming tiger economies, reluctantly sought the rescue after its currency came under attack last month.
Its financial crisis could be a sign of things to come across Southeast Asia as other booming economies face maturity and the realities of an interconnected global marketplace. The freewheeling spending and rising debt that characterized their growth are beginning to put a drag on the entire region as loans go bad and speculative ventures fail.
Shigemitsu Sugisaki, IMF deputy managing director who chaired the Tokyo conference, called the package a "historic arrangement" for the Asia Pacific region and a potential model for future rescues.
It also is a clear warning to other developing nations to get their economies under control.
"You might look at [the crisis] as growing pains for developing economies," said Ellen Hughes-Cromwick, a senior economist at the Ford Motor Co. in Dearborn, Mich. "They really have to undergo the process of making this transition."
Thailand once was the envy of Asia, with annual growth rates of nearly 10 percent. That growth fueled a speculative real estate and investment boom. Developers borrowed heavily in a rush to build skyscrapers but couldn't find tenants to fill them. The precarious balance began to tilt.
Since July 2, the Thai baht has lost about one-fifth of its value, slashing the value of the nation's foreign investment by a comparable amount and prompting massive bank runs and sell-offs in the local stock market.
The Thai crisis triggered a chain reaction in which nervous investors attacked currencies of neighboring nations such as the Philippines and Malaysia.
Mr. Sugisaki said the $16 billion package of three-year to five-year loans exceeded IMF estimates of Thailand's immediate needs.
The IMF pledged $4 billion, matched by an equal amount from the Japanese government. …