5 Bahts – Thailand

In 1982, Thailand's currency situation was characterized by a managed exchange rate system under significant pressure. The Thai baht was pegged to a basket of currencies, heavily weighted towards the US dollar, which had been appreciating strongly due to high US interest rates and tight monetary policy. This created a major challenge for Thailand, as the strong dollar made Thai exports more expensive and less competitive on the global market, exacerbating a growing trade deficit and straining foreign exchange reserves.

Domestically, the Thai economy was grappling with the aftermath of the 1979 oil shock and a period of high global inflation. While inflation had been brought down from double digits to around 5% by 1982 through tight fiscal and monetary policies, this came at the cost of slower economic growth. The government, led by Prime Minister Prem Tinsulanonda, was pursuing stabilization policies under guidance from the International Monetary Fund (IMF), which included reducing budget deficits and controlling credit growth to restore macroeconomic balance and protect the currency peg.

Consequently, the Bank of Thailand was forced to actively defend the baht's fixed exchange rate. This defense required high domestic interest rates to attract capital and frequent interventions in the foreign exchange market, depleting reserves. The situation highlighted the inherent tensions of the peg and set the stage for future financial liberalization. The pressures of 1982 were a precursor to the more profound reforms that would come later in the decade, including a shift to a more market-oriented exchange rate system in the early 1990s.