Chapter 241 The role of the IMF

  Although the liquidity in the Thai baht foreign exchange market has recovered, this liquidity is based on the fact that the BOT has the ability to intervene in the market. If the BOT loses the ability to intervene in the market, this liquidity will soon disappear.

   Currently underpinned by false news, this liquidity is clearly not going away.

  When the liquidity of the market was restored, commercial banks holding Thai baht in the global market breathed a sigh of relief, and their worst fears did not appear. After the intervention of the BOT, the exchange rate of the Thai baht has risen and returned to above the level of 26 baht to 1 US dollar.

  At the same time, various commercial banks participating in the foreign exchange market also began to conduct foreign exchange transactions in an orderly manner. The arbitrage, conversion into US dollars, and foreign trade settlement into Thai baht began to become active in the market again.

  …

  In the office of the president of BOT, Malaga looked sad, without a smile at all. Yesterday's report on the global market situation was placed on his desk, but he had no thought of reading it.

  Villawang's resignation also shocked him and made him feel sad. Although the two do not work in the same department, one of them is in charge of monetary policy and the other is in charge of fiscal policy. The two sides work together, there are many exchanges between departments, and the private friendship is not bad.

   In his heart, he admired the ability of the former finance minister. Ask yourself on weekdays, if you sit in Verawang's position, I'm afraid it's impossible to do better than him. The current tense domestic economic situation in Thailand is not his fault in conscience, but the deterioration of the entire international situation.

   Specifically, it is the evil result of the inability of the economy to transform rapidly. Blindly relying on exports to drive the economy and relying on foreign capital investment to promote economic growth will not only cause a shortage of domestic demand, but also indirectly cause capital to flow to industries with quick results and short cycles instead of industries that can truly make long-term profits.

  In this way, once the foreign exchange market is a little turbulent, this kind of capital will be quickly withdrawn from Thailand, causing the entire country's economy to appear internally trapped and externally deficient, just like it is now.

  What the Thai authorities can do is naturally to retain these capitals. In this case, it is inevitable to keep the value of the Thai baht stable. Because once the Thai baht depreciates, in addition to the hot money fleeing faster, those real investment funds will also choose to flee, leaving Thailand with ruins and devastation.

   But how easy is it to keep the baht from depreciating?

   Expanding the fluctuation area, this trick must not be used, because the lessons learned from Mexico are right in front of us. This sudden fluctuation not only caused more violent attacks, but also caused the capital in the entire Mexican market to flee like crazy. As a result, Mexico was forced to announce a devaluation in just two days.

As far as the current situation is concerned, no country in the world that has suffered currency attacks has done better than the Bank of Thailand. In addition to imposing punitive offshore lending rates, it also prohibits local banks from lending to foreign investors. Even a country like Sweden can only do a little bit.

   But judging from the effect, the form is still not optimistic. Not only was the international capital not frightened, but it made a comeback after just two weeks. This time the BOT is probably not facing the same situation as last time.

  In May, they and the Monetary Authority of Singapore jointly entered the market. The two sides worked together to stop the selling in the spot foreign exchange market, and there were assistance from the central banks of several other countries. But now, according to his understanding, international capital is not only hoarding capital in Malaysia, the Philippines and other places, but even Singapore, a regional financial center, has begun to make some moves.

  The Monetary Authority of Singapore, based on the position reports of various banks in the foreign exchange market, found that forward contracts have increased significantly in the near future. In addition, loans in Singapore dollars have also increased significantly in the short term. Although the current increase is not too obvious, anyone with a discerning eye knows that this is the reason why the focus of attack will be shifted to other regions after Thailand has completely fallen.

  Without reinforcements and dollars, the only way left is to seek help from international financial institutions.

   But as we all know, although the International Monetary Fund and the World Bank provide financial assistance to member states in name, the decision-making mechanism of these institutions is: whoever has more shares has more voting rights. Needless to say, the country with the largest share is undoubtedly the United States.

   As soon as he thought of the role played by the United States in this currency crisis, Malaga broke into a cold sweat. Although subject to the purpose of the establishment of the IMF, the International Monetary Fund will certainly not refuse to save it, but according to the rules and regulations, the firefighting loans it can provide to Thailand must be extremely limited, and it cannot solve the urgent need at all.

  More importantly, the assistance of institutions like the IMF has extremely strict additional conditions. These conditions generally require the government to further open the market and reduce intervention, etc., which are completely free market. If this is the case, the overall strategy of Thailand's economy relying on exports to drive economic growth will have to be completely adjusted, almost no less than tearing down and rebuilding.

  Strictly speaking, the IMF is a national-level consortium organization, a product of the additional conditions of the Bretton Woods system. The purpose of its establishment is to maintain the trade surplus and deficit of various countries, but in fact it is a tool to advocate the free market.

  If small countries lose trade protection, not to mention whether capital will give them enough time to develop, even maintaining economic independence in the end is a big problem.

   "Since it is here, let it be safe!" Malaka lamented, his tone full of sadness and helplessness.

  …

In the evening, Shawan, who was in charge of the foreign exchange market, knocked on the door and entered Malaga's office, reporting to him the market conditions of the day: "Mr. President, a total of 1.4 billion US dollars of foreign exchange reserves were sold today. In addition, in the forward foreign exchange market , consumed $400 million, for a total of $1.8 billion."

  Although he was mentally prepared, Malaga was still taken aback. Originally according to his estimation, although the current foreign exchange reserves of more than 10 billion US dollars are not enough to support the stability of the Thai baht, at least it can support it for a period of time. However, judging from the current situation, I am afraid that the Thai baht will be announced to fall within a few days.

Seeing Malaka's face was cloudy and uncertain, Shawang smiled and said, "Sir, you don't have to worry too much. Today's currency exchange is mainly focused on the foreign trade settlement in May. I believe that after this period of time there will be no With such a large transaction volume, foreign exchange reserves will also rise at the same time."

  Shawan took it for granted that it was due to the foreign exchange settlement season. Although he didn't believe it, he naturally wouldn't slap himself because the news of the successful defense of the Thai baht came from his mouth.

   Malaga naturally wouldn't believe what he said, but the deeper reasons were difficult to explain to him, so he had to deal with a few vague words, and immediately dialed the phone number of the Prime Minister's office after Shawan left in a huff.

   "Malaga, what's the matter?" Chavalit's voice revealed a kind of exhaustion. It was his idea to force Verawang to step down, and he had only communicated with a few members of the inner circle in advance. When the news of Verawang's resignation spread, the voices of all parties immediately emerged. Even within the ruling party, there were many voices of dissatisfaction with his ruthless behavior.

  The most important thing now is to determine the candidate for the new finance minister as soon as possible, to appease the dissatisfaction of all parties, and to implement economic stimulus policies as soon as possible to reverse the current situation.

   Malaga was not too polite, and said directly: "Today, another 2 billion US dollars will be spent. According to the current speed, I am afraid that the depreciation will be announced in a few days."

  There was a silence on the phone, and after a long time, Chavali asked unwillingly: "Is this an attack by the state's hot money or the shock caused by Vilawang's sudden resignation?"

   "I'm afraid it's both!" Malaga said bitterly. Although he complained about Chavalit's sudden forcing of Vilawang to resign, but the matter has come to this point, it is meaningless to talk about it now.

  Chavali was silent for a long time before he said leisurely: "Since this is the case, what else can we do?"

He also has some regrets about dismissing Villawang. Although he knows that it is not a good time, he urgently needs someone to be a scapegoat, and this person's status cannot be too low, and he cannot be an unknown person, otherwise the overwhelming public opinion will Directly at himself.

   "I'm afraid you need to issue a statement in person to explain to the outside world the reasons for Verawang's resignation, and reiterate your determination to defend the Thai baht, so as to give the market a positive reaction." Malaga said cautiously.

  He has thought of almost all the ways he can think of, but now he can only continue to pull the tiger's skin to support the banner, hoping to scare away some speculators.

Chavali thought for a while, and said, "Is there only one way?" Deep down, he was unwilling to make such a promise, because once the baht finally fell, he might not be far away from leaving . But when he heard Malaga's answer, he knew that this was probably the only way, because Malaga could naturally think of such obvious consequences.

"Except for this, I'm afraid it's hard to do anything else." Malaka paused, as if thinking of something, and then said, "There is no other way, that is to apply for assistance from the International Monetary Fund, but we support Not until the day when the aid arrives."

  "International Monetary Fund?" Chavalit asked suspiciously, and immediately rejected the proposal, "If the current situation is followed, what is the worst outcome after we announce the free floating of the Thai baht?"

   What he said naturally did not refer to the economic situation, but the political future of the two. Although it is a bit abrupt to throw this kind of question to Malaka, Malaka understands the meaning of Chavali's words.

  According to the current development, the depreciation of the Thai baht is bound to trigger a financial crisis in Thailand, which in turn will trigger panic in the entire market. Naturally, someone needs to be responsible for this situation, and the entire cabinet, including Chavalit, will be responsible for it. Subsequent candidates will be in this mess. At that time, they will contact institutions such as the IMF, and they will not be responsible for agreeing to the harsh conditions for opening up the entire market.

   "We will not be responsible for the worst result!" Malaka understood and said quickly.

Seeing him so upbeat, Chavali laughed, then raised his voice, and said loudly: "The International Monetary Fund still needs to get in touch, if they can give us a helping hand in time, it is always a good thing! "He deliberately put a lot of emphasis on time, just to let Malaga drag it on at the right time.

   "I see!" Malaga replied equally loudly.

  …

   "Thailand is over!" Watching Prime Minister Chavalit on TV sternly reiterated his promise that the Thai baht would not depreciate, Zhong Shi said with a smile to a room of analysts.

   Thank you Dragon War Ghost for voting again! Thanks to book friends Decadent Fog for their evaluation votes!

  

  

  (end of this chapter)