Thailand to receive $16 billion in loans

TOKYO International donors offered Thailand the world'ssecond-largest economic rescue plan Monday - a $16 billion loanpackage designed to shore up the Thai currency and troubled financialsystem.

More than half the loans come from Thailand's neighbors in Asia,led by Japan, which is putting up one-fourth of the money. Another$4 billion is to come from the International Monetary Fund.

Timothy Geithner, a senior Treasury Department official,represented the United States, which did not contribute directly.Germany, Britain, France and Canada were represented at the meetingbut did not contribute.For years, Thailand had boasted one of the world'sfastest-growing economies. But in early July, the baht currency fellsharply, exacerbating severe problems in the financial industry.Thailand also is coping with slumping real estate prices and badloans that are debilitating its financial institutions. The rescueoffer came during a time of strict economic reforms that includecutting government spending, raising taxes and closing dozens oftroubled finance companies.The size of the package is second only to the $50 billionoffered to Mexico in 1994. The Marshall Plan that aided Europe'srecovery from World War II amounted to almost $13 billion."The impressive part of this package is the extremelysignificant contributions from countries in the Asia-Pacific region,"said Eisuke Sakakibara, Japan's vice finance minister forinternational affairs.Analysts said the large Asian contribution to Thailand indicatesa new concern for regional economic stability, and that Japan's rolebrokering the offer heightens Japan's profile in the increasinglyinterdependent region."This is a natural development for Japan as there is an implicitrule in the international community that the strongest country takesthe lead" in regional stability, said Robert Feldman, economist atSalomon Brothers Asia.Mark Sunberg, a regional economist at Salomon Brothers in HongKong, said, however, that the Asian response in general was "quiteunusual.""It indicates that certain countries in the region are concernedabout stabilizing Thailand's economic situation" to prevent thetrouble from spreading, Sunberg said.Beyond the $4 billion apiece from Japan and the IMF, Australia,Malaysia, Hong Kong and Singapore each will provide $1 billion each,according to Shigemitsu Sugisaki, deputy managing director of theIMF.South Korea and Indonesia will lend $500 million each. Theother $3 billion would come from the World Bank, the Asia DevelopmentBank and possibly China, Sugisaki said.The amount of the loan package was $2 billion more than the IMFearlier had estimated Thailand would need through 1998 to get itseconomy back on track. Sakakibara said it would be plenty.Investors appeared to shrug off the rescue package, with shareprices on the Thai stock market sliding 0.72 percent in subduedtrading Monday.However, Thai Finance Minister Thanong Bidaya was so optimisticthat the plan would restore confidence in his economy that he said hewould ask private Japanese banks Tuesday to extend existing loans."We would like to assure them that with the IMF program done weare trying our best to restore the economic conditions of Thailand,"he said.Nearly half of Thailand's debt is owed to Japanese banks. TheThai government owes $16 billion to foreign banks and bondholders,Thanong said.