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