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Thailand External Debt
The Thai total long-term public and private debt grew from
US$728 million in 1970 to US$13.3 billion in 1985. The external
debt was increasing at a faster rate during this period than the
growing gross national product
(
GNP--see Glossary). In 1970 the
external debt was 11.1 percent of GNP, increasing to 36 percent
of GNP by 1985. The ratio of debt payments or debt service to the
total export of goods and services, one indicator of Thailand's
ability to meet debt payments, increased from 14 percent in 1970
to 25.4 percent in 1985. The growth of external indebtedness
averaged 25.2 percent between 1970 and 1980, compared with an
average of 21 percent for Southeast and East Asian middle-income
oil-importer countries. Public debt as a percentage of exports
went from 47.9 percent to 75.9 percent between 1980 and 1983, but
the proportion of public borrowing from foreign sources dropped
from 52 percent to 42 percent during the same period. This was
indicative of the growing concern of the public sector with the
enlarged foreign debt and hence a higher reliance on domestic
borrowing, which went from 48 percent to 55 percent during the
same period. In the early 1980s, Thailand was characterized by
high competition between the government and the private sector
for scarce domestic savings, which forced private firms to rely
more on external borrowing.
The composition of Thai indebtedness in terms of interest
rates, maturity, and currency structure appeared to be better
than that in most other developing countries. Because of its high
credit rating, Thailand could borrow at about 8.4 percent in late
1983, compared with an average rate of 10.1 percent for other
middle-income oil-importer countries. It had also the longest
loan average maturity, 17.2 years compared with 12.2 years.
In terms of currency denomination, the Thai external debt
consisted mostly of two currencies: the United States dollar and
the Japanese yen, with increasing reliance on the yen because of
the willingness of Japanese banks to lend at a lower spread than
the other banks. Thailand was exposed to the risk of yen
appreciation in the early 1980s because Japan received only 14
percent of Thai exports while accounting for 26 percent of
imports. Meanwhile, the value of the yen had appreciated
substantially relative to the baht. The baht was pegged to the
United States dollar until 1984 when it had a fixed exchange rate
of B23 per US$1. Thereafter, the baht was pegged to a basket of
currencies and devalued by 14.8 percent against the dollar.
According to some observers, Thailand needed to revise its
external debt portfolio as well as limit its reliance on external
debt.
Data as of September 1987
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