Ex-BOT chief against moving FIDF debt to central bank to cut public debt
The government's push to reduce the Financial Institutions Development Fund (FIDF) debt to ease the state budget or public debt burden is not new.
Throughout his tenure as Bank of Thailand (BOT) governor from 2010-2015, Prasarn Trairatvorakul faced similar calls to lift burdens on the budget from FIDF debt that originally totalled 1.14 trillion baht.
One proposal was to transfer it to the central bank, with commercial and state-owned banks contributing a supplementary fee of 0.47% and the BOT then using 0.46% to repay the FIDF debt and 0.01% to pay the deposit protection agency.
That proposal now looks set to resurface as the Srettha Thavisin government seeks ways to cut high public debt and curb the BOT’s autonomy.
However, Prasarn cautioned against the assumption that transferring FIDF debt to the central bank will reduce public debt. He points out this would merely switch the debt’s management to another account.
Currently, the central bank manages repayment of the FIDF debt – which now totals just over 600 billion baht – as per the BOT Act.
Amending the BOT Act to reduce the bank's power and independence is unnecessary, according to Prasarn.
He said past amendments of the act had judiciously distributed decision-making on monetary policy, previously the sole domain of the BOT governor, to the seven-member Monetary Policy Committee comprising the governor, his/her two deputies and four external experts.
Prasarn also emphasised that the BOT's annual inflation targets are subject to approval by the Finance Ministry, reinforcing accountability and transparency. If the inflation targets are not met, the BOT must report to the ministry and explain to the public in a clearly defined procedure involving deadlines for policy meetings and public announcements.
Given these mechanisms, Prasarn feels the current BOT Act enhances transparency and fosters a clear political relationship.
He warned against the government’s ongoing push for changes, including a reduction in interest rates.
“Attempts to pressure lower interest rates could undermine confidence in the financial markets, leading to increased borrowing costs for both the public and private sectors and further complicating financial stability,” he said.
