Thai Government, IMF to Agree on VAT Increase

SAN FRANCISCO -- The Thai government is nearing an agreement with the International Monetary Fund to make a one-time increase in the value-added tax (VAT) from 7% to 10%.

An agreement on an economic bailout and restructuring package for the country is expected to be signed by Aug. 21, according to Bangkok's The Nation newspaper, and will likely include a $5 billion line of credit from commercial banks in the U.S., Europe and Asia, and a matching contribution from the IMF.

Since June, the government has closed 58 Thai finance companies, out of a nationwide total of 91, that lost money to developers who over-built the property market.

Thailand's financial mess was exacerbated by the central Bank of Thailand's decision to print more money in an effort to offset the country's balance of payments crises, which led to the devaluation of the Thai baht on July 2.

Since then the baht has fallen as much as 29% against the greenback.

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