BOT governor proposes baht-for-reserve trade

 

 

Prasarn noted that the central bank supports infrastructure investment. However, any party wanting to dip its hand into the foreign reserves should beware of the cost in reserve build-up. However, the central bank would demand Thai baht in return for the foreign currency-denominated reserves, to be brought out of the central bank.

Yesterday, PTT chief Pailin Chuchottaworn said that the reserves should be used to finance the construction of a new fuel terminal. On the same day, Charoen Pokphand Group's chairman Dhanin Chearavanont also supported the investment in irrigation system.

"No matter if they are from the agriculture or energy sector, if they want to use the reserves, they should trade Thai baht for it as we have shouldered cost in building up the reserves.  If it is the government, baht bonds could be issued and then traded with the reserves. We'll be delighted as this will reduce our loss," he said.

The central bank has shouldered losses of some Bt300 billion, due to its foreign exchange stabilisation measures to limit inflows-induced volatility. Without the stabilisation, the Thai baht could have been stronger thanks to huge inflows in the past year. As a result of the stabilisation, the foreign reserves have swollen to US$175.37 billion as of July.