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Thai prime minister meets king amid resignation rumors

August 7, 1997

BANGKOK, Thailand (AP) _ The beleaguered prime minister met with Thailand’s king Thursday, sparking speculation he would resign over an economic crisis that has forced the country to accept a painful restructuring plan.

Prime Minister Chavalit Yongchaiyudh emerged from the three-hour meeting still holding office. Rumors of his downfall, however, prompted a mild rally on the Stock Exchange of Thailand index, which closed 2.72 points higher at 638.04.

Government officials characterized the meeting as Chavalit’s monthly briefing with King Bhumibol Adulyadej. Chavalit was accompanied by his finance minister and central bank governor, both recent appointees grappling with the worst economic crisis Thailand has faced in 15 years.

Expectations that Chavalit would resign were fed by a scathing indictment of his nine-month government by Anand Panyarachun, who served as prime minister twice during the early 1990s and is widely regarded as honest and capable.

``Public trust and faith, especially in the prime minister’s words, have diminished,″ Anand was quoted by The Nation newspaper as saying Wednesday. ``A way out is for him and his Cabinet to step down to show responsibility for the mistakes.″

Several academics and newspaper editorials have also called for the prime minister to resign, since the crisis has only worsened since he was elected last year on promises of enriching the country.

On Tuesday, Chavalit’s government announced it would seek between $10 billion and $20 billion in assistance from the International Monetary Fund.

In exchange, the IMF is requiring Thailand raise the value-added tax and close 42 troubled finance companies beset by bad loans. Government spending cuts are under negotiation.

After a decade of double-digit growth and surging exports, Thailand’s economy started faltering in 1996, when financial institutions were threatened by making too many loans to a glutted property sector. Export growth slowed to zero.

The crisis peaked last month when the currency was floated and promptly lost 20 percent against the dollar. Although the move was intended to make Thai exports more competitive, gasoline prices were increased Thursday and other hikes on imports are expected.

The de facto currency devaluation prompted speculative attacks against other Southeast Asian currencies, and regional leaders are hoping the IMF can sort out Thailand’s mess before it spreads.

The government’s closure of the 42 finance companies brings the total shut down this year to 58.

Fears that the 33 remaining and another 15 commercial banks would be next have caused some Thais to pull out deposits. Others are hoarding food.

Rumors of a military coup have also been rife, though they are quickly denied.

On Thursday, Thailand’s central bank raised the interest rate it charges financial institutions that borrow from its bank-rescue fund by 2 percentage points to as much as 18 percent.

Meanwhile, officials said Finance Minister Thanong Bidaya would join an IMF-organized meeting Monday in Tokyo to discuss the aid package with potential donors.

The package could be up to $20 billion, said Japan’s leading financial daily, Nihon Keizai Shimbun.

Update hourly