Currency Crisis and IMF Reform in Thailand

Abstract

Not a few arguments have already been heard regarding the real cause of Asian Currency Crisis in 1997. Although some of those arguments tend to conclude that the Crisis was caused by compounded factors, this article, while focusing on the case of Thailand where the whole series of Asian Crisis took fire and investigating the realty of the policy direction chosen by the government during the recent years of Economic Liberalization, tries to describe the causal relation among the supposed different factors which leaded to the Crisis. Also, based on such an interpretation of the cause and effects, the article goes into the details of the policy reform of the government guided by IMF under its well-known pressure of the ‘conditionalities’ set in exchange for the actual cash drawing.

The first part of the study focuses on the Financial Crisis which must have started in Thailand at latest since in the middle of 1995 and become most serious by the end of 1996. While inquiring into its origin, the study get to the several facts to suggests the Financial Crisis must have been leaded by the very policies of the government introduced in the recent course of Economic Liberalization, including the financial liberalization, capital market expansion, enhancement of real-estate trades, etc.. Next focus is made on the long argued problem of the huge current account deficit, which is seemed to one of the factors that have played one role in the causal link of the Currency Crisis. The study sees the essence of this problem in the structural trade deficit which must be originated in the government's very policy for industrialization depending too much upon the Foreign Direct Investments. The last part of the article, after looking into the details of IMF reform, suggests one interpretation to see it as an ambitious trial for a dynamic change of the oligopolistic structure of Thailand's financial sector. The study sees such an attitude of IMF's trial in one example of the company law reform, namely the Corporate Reorganization Bill, where one tipical battle can be observed between the reformers and the so-called nationalism asserted by the local business circles who stick to their vested rights in the oligopoly.