Imf Intervention Of Thailand : Imf Essay

An example of the IMF’s ability to promote strong, stable economies is the case of Jordan. In the 1980s the declining oil prices and the related recessions in the Middle Eastern oil exporting countries was disadvantageous to Jordan. In 1989 Jordan had a 30-35 percent unemployment rate and was having a hard time due to their external debt. This led the authorities to request the country’s first arrangement with the IMF. Economic reforms were a part of the agreement between Jordan and the IMF. Jordan agreed to a series of five year reforms financed by the IMF, therefore the government took on huge reforms prioritizing foreign investment and easier trade policies. They were ultimately able to reduce the overall debt payment up to a manageable level. Jordan is currently regarded as a country by which the effectiveness of the IMF assistance is assessed.

The economic boom of 1977 to 1997 had a dramatic impact on Thailand’s northern villages. While the center of the country, Bangkok, was rapidly industrializing, the north fell behind. Due to a lack of income and resources, the north had to watch the

The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with one other. This system is essential for promoting sustainable economic growth, increasing living standards, and reducing poverty. The Fund’s mandate has recently been clarified and updated to cover the full range of macroeconomic and financial sector issues that bear on global stability.

The early 1990s exhibited a boom in many economies throughout the world due to factors such as globalization and other trade liberalization practices, but this boom was quickly halted in the latter half of the decade when bad investments nearly sent the entire world into economic turmoil. With the introduction of free trade practices such as the North American Free Trade Agreement, or NAFTA, the economies of many of the worlds “developing countries” skyrocketed due to an influx of foreign investment. At, first this exponential boom in small countries with emerging economies seemed like it would never end. However, this all changed when investors “caught wind” that these developing countries did not have the means to keep up with the massive inflow of investments. This led to what we know refer to today as the Asian Financial Credit Crisis. In order to understand how to prevent such a disaster from happening again, we must first examine how exactly this event was triggered, and what should have been done differently.

Economic Considerations: Thailand is great developing country because of the smart economic policies but political environment is not stable so there is effect for investors to pay attention much to invest.

In 1997 the country’s exports were no longer booming and the Thai economy entered a unsafe and unpredictable phase. Foreign investors were skeptical about the current-account deficit and the big loans property developers. Bad debt continued to mount up and the stock market crashed to depths not seen in eight years. This caused the baht to fall prey to speculative attack. High debt, heavy borrowing, large current account deficit, and the semi-fixed exchange rate system all played a part to the Thai crisis.

Research into Thailand showed that Thailand’s budget deficit narrowed to $4.2 billion (USD) from $5.1 billion (USD) in 2009. This demonstrates that the government is committed to meeting its foreign debt obligations and has not overextended itself concerning external borrowing. The baht (Bt) will remain strong against the United States dollar and the Bank of Thailand (central bank) will continue to intercede in the market if necessary to limit currency instability. Thailand’s banking sector is currently in a healthy state. It is adequately capitalized and has recorded strong profits in the last couple of years. Thailand’s political risk remains high due to the impending passing of the king and the difficulties that the prime minister has had with the House of Representatives. The economic structure risk is minimal even though the GDP growth has been low in the recent years, but Thailand has demonstrated a strong rebound in 2010 (Economist Intelligence Unit: The Economist [EIU], 2011).

The IMF did provide relief but at the expense of the food subsidies which the Thai rely on to compete for food prices. If the economy of Thailand were left alone, given their own economic sovereignty rather than launching them in the vicious global market while being compared and linked to the titanic financial power of the dollar, their quaint agricultural and textile industry could have thrived and met the requirements to maintain their nation. The deeply rooted free market ideals of globalization forced the Thai baht to be overvalued. The wolf pack like instincts (bred by the greed and profit seeking nature of global capitalism) of the foreign investors let the baht to be over sold and the price of the currency to be driven down into obscurity. The global market capital perspective provides an insightful perspective as to why the Thai currency crash was so impactful to not just Bangkok, or Asia but the entire globe. The interconnectedness of the international economy provides a community for nations but due to the infinite connections that exist in this paradigm, the problems of one place can be caused by anybody and leave widespread consequences in every modicum of the

Starting from an extremely low base, Laos’ GDP growth rate has an average of 7 % since 1990s (Sondergaard) until the Asian currency crisis hit its economy in 1997 (“Laos Profile - Overview”). Laos then experienced a second economic crisis of its history. The national currency lost “more than nine-tenth of its value” (“Laos Profile - Overview”) and

The Royal Bank of Canada (RBC) moved back to Thailand on June 16,1997, which they offered corporate and correspondent banking services from there office located on wireless road. On July 2, the government reacted to the financial and property collapse of the economy by floating the baht (domestic currency) for the first time in thirteen years. Then the bleeding of the collapse of the market was finally sealed when the International Monetary Fund (IMF) intervened and started a 16.7 billion dollar bailout funding program to help Thailand recover from the financial crisis. This was the largest bailout fund since the Mexican peso crisis in

In 1997, there occurred certain shifts in expectations from the market. The regional contagion and confidence led to the East Asian financial turmoil. In 1990s, it had been reported that the microeconomic and macroeconomic businesses were not performing as expected. The local and international investors had not held enough grips into the looming financial challenges to be expected by the financial fragments. These investors panicked and participated in fraudulent and faulty approaches and policies of operation in the market through the influence of the International Monetary Fund together with the global financial body. The financial policies, which were laid by the small businesses within the region, had failed to bring enough financial performance in the local and international market. For instance, reports claim that these businesses were not large enough to hold immense support to the structure of the economy in the region. With time, the stability of the financial structure was brought to question. This was later contributed by the influences obtained from the international financial bodies and the International Monetary Fund committee (Corsetti, Pesenti, & Roubini, 1999, p.305-6).

This resulted in the International Monetary Fund (IMF) and the World Bank having to assist developing countries and institute economic reform. This series of events has occurred at least two times in history; during the 1970s in Latin America and during the 1990s in Asia. Following this information, a pattern becomes apparent, consisting of a three-phase cycle of over-borrowing, crisis, and adjustment (Oatley p. 298). However if global debt continues to rise to astronomical amounts, economic “bailouts” after financial crisis has occurred will be eventually no longer be a viable option.

Thailand also fostered the restructuring of distressed financial institutions and enacted budget cuts to free up resources to help finance the restructuring and to support improvement in the current-account position. Besides that, Thailand government deepened the role of the private sector in the Thai economy and sought to attract foreign capital through other reform measures. Monetary policies of Thailand focused on both supporting exchange-rate stability and fostering economic recovery. As the Thai Baht began to steady, the Thailand government decided to reduce interest

Another reason behind the 1997 Asian financial crisis was the large current account deficits. Asian leaders agreed that large current account deficits could not be good, but they made the logical economic argument that if a current account deficit mostly reflects higher investment, it would eventually increase an economy’s competitiveness and therefore its ability to repay the debt, and would certainly be more sustainable than a deficit driven by

Improving the value of exports is the primary goal of Thailand’s international trade policy. The Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) was established as an effective cooperative strategy for gaining market advantages through regional market integration. Thailand aims to capitalize on trade agreements by networking and entering partnership with neighboring countries. Currently, Thailand’s cross-border trade in the Greater Mekong Subregion (GMS) plays a crucial role in globalization, because it facilitates rapid and convenient trade and investment. Countries seek new export markets to disperse the risk of domestic market concentration, as evidenced by the economic recessions affecting