Such was the scope and the severity of the collapses involved that outside intervention, considered by many as a new kind of colonialism, became urgently needed. Since the countries melting down were among not only the richest in their region, but in the world, and since hundreds of billions of dollars were at stake, any response to the crisis had to be cooperative and international, in this case through the International Monetary Fund (IMF). The IMF created a series of bailouts ("rescue") packages for the most affected economies to enable affected nations to avoid default, tying the packages to reforms that were intended to make the restored Asian currency, banking, and financial systems as much like those of the United States and Europe as possible. In other words, the IMF's support was conditional on a series of drastic economic reforms influenced by neoliberal economic principles called a "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to cut back on government spending to reduce deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values. Above all, it was stipulated that IMF-funded capital had to be administered rationally in the future, with no favored parties receiving funds by preference. There were to be adequate government controls set up to supervise all financial activities, ones that were to be independent, in theory, of private interest. Insolvent institutions had to be closed, and insolvency itself had to be clearly defined. In short, exactly the same kinds of financial institutions found in the United States and Europe had to be created in Asia, as a condition for IMF support. In addition, financial systems had to become "transparent", that is, provide the kind of reliable financial information used in the West to make sound financial decisions.
However, the greatest criticism of the IMF's role in the crisis was targeted towards its response. As country after country fell into crisis, many local businesses and governments that had taken out loans in US dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. The dynamics of the situation were closely similar to that of the Latin American debt crisis. The effects of the SAPs were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates. The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic pain. They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001.
Although such reforms were, in most cases, long needed, the countries most involved had ended up undergoing an almost complete political and financial restructuring. They suffered permanent currency devaluations, massive numbers of bankruptcies, collapses of whole sectors of once-booming economies, real estate busts, high unemployment, and social unrest. For most of the countries involved, IMF intervention had been roundly criticized. The role of the International Monetary Fund was so controversial during the crisis, that many locals called the financial crisis the "IMF crisis". To begin with, many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows); maintenance of high domestic interest rates in order to suck in portfolio investment and bank capital; and pegging of the national currency to the dollar to reassure foreign investors against currency risk. In other words, that the IMF itself was the cause.
Further information: Economy of Thailand
From 1985 to 1996, Thailand's economy grew at an average of over 9% per year, the highest economic growth rate at that time. In 1996, an American hedge fund had already sold US$400 million of the Thai currency. From 1985 until 2 July 1997, the baht was pegged at 25 to the dollar.
On 14 May and 15 May 1997, the Thai baht was hit by massive speculative attacks. On 30 June, Prime Minister Chavalit Yongchaiyudh said that he would not devalue the baht. This was the spark that ignited the Asian financial crisis as the Thai government failed to defend the baht, which was linked to the U.S. dollar, against international speculators. Thailand's booming economy ground to a halt amid massive layoffs in finance, real estate, and construction that resulted in huge numbers of workers returning to their villages in the countryside and 600,000 foreign workers being sent back to their home countries. The baht dropped very swiftly and lost half of its value. The baht reached its lowest point of 56 to the dollar in January 1998. The Thai stock market dropped 75% in 1997. Finance One, the largest Thai finance company, collapsed.
Thailand's administration eventually floated the local currency, on 2 July. On 11 August 1997, the IMF unveiled a rescue package for Thailand with more than $17 billion, subject to conditionalities such as passing laws relating to bankruptcy (reorganizing and restructuring) procedures and establishing strong regulatory frameworks for banks and other financial institutions. The IMF approved on 20 August 1997, another bailout package of $3.9 billion.
Thai opposition parties claimed that former Prime Minister Thaksin Shinawatra had profited from the devaluation, although subsequent opposition party-led governments did not investigate the issue.
By 2001, Thailand was doing well and seemed to have recovered. The tax revenue allowed the country to balance its budget in 2004, four years ahead of schedule. By November 2006, the Thai baht reached its previous highs of 36.5 to the dollar, and as of May, 2007 has become even stronger, at approximately 33 baht to the dollar. Recently as of March 2008, the baht is now 31 baht to the dollar. the baht continues to strengthen, and the government is boosting the Thai economy to a stable growth rate of 6% by 2009.