The Bank for International Settlements was set to announce yesterday that it has arranged a $3.3 billion (2 billion) bridging loan for Thailand to tide it over until it can draw on a $16 billion international rescue package agreed last week.
Thanong Bidaya, Thai finance minister, said the loan would be used to shore up foreign reserves and help cover a balance of payments shortfall. The loan, which will be taken in financial markets as a sign of Thailands continuing urgent need for foreign exchange, is expected to include contributions from the US Federal Reserve and European central banks. This will broaden the geographic spread of assistance efforts for Thailand which had concentrated on contributions from Asia-Pacific countries, alongside the IMF, World Bank and Asian Development Bank.
European central bankers said the BIS loan would be strictly short-term in nature, with repayment pegged to the proceeds of loans from the World Bank and IMF.
Which have been promised as part of the broader $16 billion bail-out. The IMF board is due to approve Thailands application for some $4 billion in loans this week.
The money will be made available over three years, and procedures mean it will take several days to disburse the first instalment. Nonetheless, commercial bankers say Thailands recourse to the BIS is an indication it may face difficulty keeping its international reserves above the $23bn level prescribed by the IMF. Many suspect that the Bank of Thailand faces a squeeze as it unwinds forward sales of dollars undertaken when it was intervening to defend the baht. The extent of this is likely to be made known on August 29, when the bank presents a balance sheet. Traders said these worries contributed to downward pressure on the baht, which closed at a record low of Bt32.70 to the dollar, down 21.4 per cent since it was floated on July 2. Thailands foreign debt totals nearly $89bn. Japanese banks, which hold about half of that, are expected to roll over most of their loans, but bankers say their attempts to syndicate an additional $5bn have run up against demands from Japanese lenders that US and European commercial banks be involved as well. Hong Kong shares hit by speculation fears, Page 5 Currencies, Page 25 Copyright Financial Times Limited 1997. All Rights Reserved.
