Reza Moghadam, IMF's resident representative for Thailand, said any wild policy swings that would sharply cut interest rates and let go of the baht exchange rate would not lead to higher Thai exports in view of the current regional economic slump, especially in Japan.

However, the IMF had recognised the steep contraction in the Thai economy and the role fiscal expansion could play as an automatic stabiliser, he said. Cash-strapped Thailand, which is weathering its worst economic crisis in decades, accepted an IMF-sponsored $17.2-billion bailout last August. In exchange, the country is pursuing deep economic and financial reforms with IMF assistance.

The economy has slumped into recession and Thai economic growth is officially projected to contract by 5.0 per centthis year, although private analysts believe it would shrink more. Thailand maintains high interest rates in a bid to protect the baht from speculation. The currency has already lost nearly 40 per cent of its value against the US dollar since the Asian financial crisis began last July.