Thailand under fire from World Bank
The World Bank yesterday joined the International Monetary Fund in criticising the Thai government for being too slow to react to this summer's currency crisis. Diane Coyle finds that the recent financial turmoil in East Asia is the hottest topic for discussion at the Hong Kong convention centre.
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Your support makes all the difference.The World Bank and IMF have confirmed reports that they are dissatisfied with Thailand's response to its financial crisis, which the international community is spending $17bn (pounds 10.6bn) in emergency funds to resolve. Both also say they warned the Thai government earlier this year about the danger its currency would collapse.
James Wolfensohn, president of the World Bank, said: "We would like to see the Thais move more quickly and more definitively." He added that the coalition government's political fragility had prevented faster implementation of policies recommended by the Bank and Fund.
"We and others have been commenting on these problems for a long time, but the Thais run Thailand," he said.
His remarks followed similar comments by Michel Camdessus, managing director of the IMF, on Thursday. Mr Camdessus said: "We have been impatient to see the reform of the financial sector put in motion." He said the Thais had complied with all the macroeconomic policy advice, tightening the government's belt and increasing interest rates.
With Malaysia's Prime Minister, Mahathir Mohamad, and financier George Soros due to speak - separately - this weekend about their sharply opposed views on the recent turmoil in Asia's financial markets, the crisis has become a dominant subject for discussion at the World Bank-IMF meetings.
In a special seminar on Asia run by the IMF yesterday, the head of research, Michael Mussa, said the Thai problems would have been less if the government had acted earlier.
"Market confidence in Thailand obviously remains fragile, and the effects have spilt over into other South-east Asian economies. Policies adopted under duress do not carry the same weight with the financial markets," Mr Mussa said.
Speaking at the same seminar Andrew Sheng, deputy chief executive of the Hong Kong Monetary Authority, defended Hong Kong's adherence to a fixed exchange rate even though it was Thailand's doomed effort to support its exchange rate that triggered the crisis in July.
A large part of the Thai problem is the exposure of its banking system to unhedged foreign currency loans taken out by private sector companies. The reform of the financial sector is seen as the main element of the rescue package.
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