From the beginning of the 1980s to the end of the decade total revenue increased by about 4% of GDP and total expenditures fell by about 5% of GDP.<sup>52</sup> In addition to the substantial tightening of fiscal policy, Thailand's economic authorities implemented a series of other measures to reduce domestic aggregate demand and to counteract the increase in money growth and the excess liquidity that was being caused by the capital inflows. The policies implemented comprise the following:

* Further liberalization of capital outflows. In April 1991, the capital account was further liberalized by allowing domestic residents to take abroad up to US$ 5 millions for investment purposes and to open foreign currency accounts with commercial banks in Thailand.

_*_ Sterlization of mone impulse. Because of the large capital inflows to Thailand -which in 1989 exceeded in value the stock of reserve money at the start of the year- the Central Bank has implemented open market operations to absorb liquidity. This has been implemented by the Bank of T-hailand issuing its own bonds, in addition to the deposits by the Treasuxy with the Cental Bank implied by the fiscal stupluses of recent years.

Reduction of trade bares. A significant progress in furthering import tariff reiorm has been made for the past years. In October 1990, tariffs on capital goods used in manufacturing were reduced from 20% to 5% and all existing exemptions or reductions of tariffi were abolished. As a result the average import duty rate has fallen from 14% in 1986 to 90/% in 1991.

* Imposition of taxes in foreign borrowing. In March 1990, a 10 percent withholding tax on interest paid on foreign loans was restored after two years of being suspended.

* Tightening of monetary policy. The authorities imposed "voluntary" limits on commercial bank's lending to "non-productive" activities such as consumer loans, mortgages and the construction of luxury condominiums, etc. Also, in 1989 the Central Bank's refinancing facility, that promotes priority sectors development by lending at preferential interest rates, began to reduce the total amount of refinancing and to increase its rediscount interest rate.

The outcome that resulted from all the policy measures mentioned above is impressive, not only in terms of the high rate of economic growth observed in Thailand in the past six years, but also in terms of the low inflation rate and the fairly stable real exchange mtefi3 I fact the inflation rate, although increasing between 1986 and 1991, still remains at a low level by any interational standard and seems to have stabilized after falling more than one-and-a-half percentage point from its 1991 level.

The most outstanding result in the case of Thailand concerns its international competitiveness, as measured by the real exchange rate, which has remained fairly stable. In fict it remained almost constant from 1986 to 1990 and began appreciating thereafter. Nonetheless the accumulated appreciation during 1990-92 has been less than 9%.

> 52 It should be pointed out that the consolidated public sector balance deteriorated in recent years, going from a surplus of about 4% of GDP in 1991, to a surplus of only 1% of GDP in 1992, and further to a deficit of about 1% of GDP in 1993 (fiscal year ending September 30). Source: IMF. This was due to both, a decrease in total revenues and grants and an increase in public sector expenditures. (See the latest paragraph in this section).

- 53 1't RER appreciated less than _5%_ during 1986-1990. See the discussion in section 6 below.

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