2. When Thailand floated the Baht and asked for IMF assistance, the country was
basically bankrupt. Even though it was not publicly known at the time, the Bank of Thailand
had made huge amounts of forward commitments to sell foreign currency in order to defend
the Baht against speculators. By the end of June 1997, net official foreign reserves had
fallen to only US$ 2.9 billion
. At that time, the country had about US$ 36.5
billion in short-term foreign debt, and the current account deficit was running at about one
billion US$ per month. The country was quickly running out of foreign currencies to meet its
obligations. Even though most of the short-term debt was due to borrowing by the private
sector, there were not enough foreign currencies in the country to repay the loans even if the
private sector had enough Baht for conversion to foreign currencies at the old exchange rate.
As a result, floating the Baht and seeking assistance from the IMF was unavoidable.