PM's office airs annoyance
The Bank of Thailand has come under greater pressure from the government after the PM's office minister questioned the role of the BOT's Monetary Policy Committee (MPC) in finding a solution to the appreciating baht and also demanded that it report to t
Stating that capital inflows were partly a result of the high policy rate, PM’s Office Minister Varathep Ratanakorn urged the MPC to play a clearer role in reining in the baht.
The MPC must report to the Cabinet every six months or sooner if there is any serious situation that could have an impact on the economy, he said.
“There could be widespread impacts from the exchange rate on both manufacturers and the workforce. Previously, the BOT board had also expressed concerns on this matter. The MPC should take these concerns into consideration,” Varathep said.
The baht yesterday appreciated 0.2 per cent from May 3 to 29.65 per US dollar as of 3.32pm in Bangkok, according to Bloomberg. The Thai currency has advanced 3.1 per cent this year, the best performance among Asia’s 11 most-traded currencies.
Meanwhile, Kasikornbank president Predee Daochai extended his support to the four proposed measures to tackle the baht’s appreciation, saying these measures would deliver good results without scaring away investors.
He said the measures were apparently a result of cooperation between the Finance Ministry and the BOT. A policy mix is favourable. He added that as long as Thailand is an open economy, where capital flows are not limited, the measures would not create a harsh impact on foreign investment.
The requirement of a longer bond-holding period would limit volatility in exchange-rate movement, he said.
THE FOUR OPTIONS ARE:
1. Bar foreign purchases of BOT bonds or set a minimum holding |period.
2. Bar foreign purchases of short-term government bonds or state enterprise bonds, with three to six months’ maturity.
3. Levy a charge on foreign bond purchases.
4. Impose compulsory hedging to limit foreign investors’ gains in exchange-rate movement.
Last week, the Federation of Thai Capital Market Organisations urged the government to limit overseas purchase of government bonds with a maturity of less than six months to help restrain the baht.
In response to a question on any discussion about the likely amendment of the Bank of Thailand Act, Varathep said the government had not planned any such amendment and had also not discussed dismissing the BOT governor.
