Washington, 22 August 1997 (RFE/RL) - There is a very strong message for the countries in transition contained in the IMF-led economic rescue program for Thailand, according to International Monetary Fund (IMF) officials.
The IMF late Wednesday approved an emergency stand-by loan of nearly $4 billion, to be combined with a $12.7 billion financing package from other Asian nations and financial institutions, to help Bangkok stabilize its currency and economy and restore confidence in both.
It was the first rescue since the IMF changed its operations and procedures in the wake of the 1995 Mexican financial crisis. IMF Managing Director Michel Camdessus says the Thai package -- put together in a matter of days -- shows how effective is the international safety net the fund now has available.
Camdessus told reporters Thursday that the spirit of regional cooperation combined with the quick and decisive action of the IMF "was truly impressive and augers well for future cooperation in the region to the benefit of both Asia and the world economy."
But added Camdessus, going beyond his prepared remarks, it all must be kept in perspective. The action is a universal reassurance that crises can be dealt with in a globalized world, but it could have been avoided in the first place if the government had only acted when its performance began to deteriorate.
It points up, he said, the "tremendous costs" for the nation involved as well as for its neighbors when any country delays in dealing with adverse developments. Every nation, he said, has the requirement of "vigilance and responsibility in handling its domestic businesses." Taking care of problems before they get out of hand, he said, is the "basic, essential form of solidarity in our globalized world."
IMF officials say that the nations in transition from planned to market economies have often heard the experts advise quick and decisive action in dealing with problems. The case of Thailand, they say, underlines just how important that advise is for everyone, but especially the nations trying to shift to market economies.
Thailand, after all, was one of the "Asian Tigers" -- a group of nations which recorded decades of strong macroeconomic growth and booming economies that served as lessons of the potential for free markets. But when things started to go bad in 1996, according to Camdessus, there was the temptation for authorities to adopted a soft approach -- to resist even a very mild slowdown of the economy.
IMF officials, including Camdessus personally, warned Thai officials that the country's financial sector was suffering underlying weaknesses that threatened the entire economy, the policy of a fixed exchange rate was beginning to hurt and government expenditures were getting out of hand.
But said Camdessus, there was a "diversity of views" among Thai political leaders -- especially in the parliament -- and there were long "hesitations" by the authorities because no one wanted to tinker with what had been a very successful economy.
The problem is, said Camdessus, that if they had acted to deal with the situations earlier, the cost to Thailand would have been a fraction. As it is, in addition to the cost of having to borrow over $16 billion, the country is having to shut down fully two-thirds of all banks and financial institutions in the country because they are too weak or insolvent to survive.
In the end, said Camdessus, assuming Bangkok authorities follow through on the strong measures now being undertaken, the country's financial base will return to its former strength.
The lesson for other nations is clear, said Camdessus. It's a lot cheaper to deal with economic problems earlier rather than later, even if a country thinks it's doing too well to get into trouble.