IMF welcomes Thai U-turn on capital controls
By Sarosa Pedrosa,WNS Thailand Business Correspondent
BANGKOK - The International Monetary Fund said Thailand's economy remains on a sound footing, while regretting an attempt to impose draconian capital controls that sparked a mini-financial crisis. In a statement, an IMF spokesman said a Fund team currently in Bangkok to conduct an annual review of the Thai economy had been in touch with the military-led authorities to discuss the short-lived controls. Effective on Tuesday, Thai authorities had ordered financial institutions to hold 30 percent of foreign inflows, except those related to exports, in a bid to stem a sharp rise in the baht's value on currency markets.
"However, the measures were too strong and far-reaching, and the partial roll-back of the new controls today (Tuesday) is welcome," said the IMF spokesman, who was not identified by name. "Thailand's underlying economic fundamentals remain solid and we believe that growth will remain resilient in the face of the financial market turbulence this week," he added. "Also, while financial markets in many other Asian countries weakened yesterday (Monday), the impact on the region is expected to be limited, and we would note that the authorities in a number of countries have announced that they do not expect to introduce controls on foreign capital flows."
Before the government backed down and dumped the controls, the move had sparked a 15-percent collapse in Thai share prices on Tuesday, sparking fears of a return to the region-wide financial crisis of 1997-98. The IMF extended a US$17.2 billion bailout to Thailand to help rescue its economy during the crisis.
posted by wnsworld @ 8:53 PM
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