Updates from the Managing Director

 [LOIMOU] Kafka 1

Indonesia is in a BOP crisis Rapid capital outflows following the Christmas Scandal threw financial markets in Jakarta into utter chaos. The withdrawal of funds en masse triggered a sharp devaluation of the rupiah, placing a larger strain on companies that borrowed from foreign creditors. Many companies that could not meet their debt obligations filed for bankruptcy. Meanwhile, the Bank of Indonesia, in an attempt to defend the rupiah from further devaluations, exhausted its foreign reserves to artificially increase the demand for rupiah. With foreign reserves dwindling rapidly, the BI now calls for international assistance. All eyes are on the IMF.

  Following a landmark $20 billion package approved by the IMF, Thailand’s conditions send its economy into a much deeper hole In a hotly debated move, Thailand accepted a $20 billion Lending Arrangement with a condition to increase its interest rates to 20%. This unprecedented jump has been met with widespread protests from consumers and business owners alike, as most businesses are no longer able to secure loans in the face of suffocatingly high interest rates. Higher costs of borrowing have suppressed investments in Thailand, and largely discouraged MNCs and foreign firms from expanding their operations in the country. Large-scale projects have been halted, and research and development activities have declined sharply in response to such monetary tightening. The Thai economy is expected to contract with a GDP growth estimate as low as -4.1% due to the exacerbation of the recession by the IMF-stipulated policy. While the Thai baht’s devaluation seems to have reached its peak, cap...