Prasarn at ease with decree

Speaking at a press conference on the BOT’s policy direction in 2012, he said his concerns were allayed by the final draft of the decree, which is different from the first draft proposed late last year.

“The proposals before the Cabinet regarding the executive decree three times since late last year left me with different feelings. Before the New Year, I was much more concerned about it, as the idea of transferring the FIDF debt to the BOT would have technically meant monetisation of public debt, or printing money,” said Prasarn.

“After the changes in the final draft, I have fewer concerns,” he said. 

The executive decree regarding the repayment of the FIDF debt, which became effective on Thursday, authorises the BOT to collect more premiums from financial institutions, implying that the burden is transferred to the financial institutions.

 

‘We can manage’

“Now, we think we can manage. If we can reduce the principal amount, the interest will be also reduced,” said Prasarn. “According to our formula, we expect to pay off the debt within the set time frame but on the assumption that a financial crisis does not happen again.” 

He said the additional contribution might increase the burden on banks. But, the BOT would not like to burden them too much and erode their financial position. After discussing with bankers what the premiums should be, the BOT will hold talks with Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong. Prasarn said the BOT was confident of managing the repayment of the FIDF debt. The sources for funds are additional premiums from commercial banks, assets of the FIDF, including shares of Krung Thai Bank. 

“The executive decree seems a problem at hand. But, this can have an impact on the central bank’s policy in the long term,” he conceded. 

Democrat leader Abhisit Vejjajiva said his party did not agree with the emergency decrees and the party will petition the Constitution Court to consider whether two decrees breached the Constitution: one is the decree authorising the Finance Ministry to borrow Bt350 billion to finance post-flood construction projects, and the other requiring the BOT to pay off debt of Bt1.14 trillion incurred by the FIDF. The two decrees might be in violation of the Constitution as there is no emergency for issuing such decrees, he said.

He also did not agree with the decree authorising the central bank to provide soft loans of Bt300 billion to flood victims. He said the government could use other means to provide soft loans to flood victims by subsidising the bank via its annual budget. The government wants to put all the burden on the central bank, he said. The decree also states that damage should have been suffered last year, which means flood victims in the South this year will not be covered by the decree, said Abhisit. 

The Democrat chief, however, said he agreed in principle with the setting up of an insurance fund that would provide flood protection to companies and people. Abhisit questioned whether the size of the insurance fund was too small. There is not much detail about management of the fund, he said.

Abhisit also referred to the Constitution Court ruling in favour of the previous Democrat-led coalition government for issuing an emergency decree to cushion the economy from the global financial crisis. 

The previous case is different from the current one, he said. “Now, there is no emergency to borrow Bt350 billion as it does not mean it would solve the flooding,” he said. 

Senator Kamnoon Sithisamarn said senators would also petition the Court to rule whether the debt decree violated the Constitution’s Article 184. He said that there is no emergency requiring the government to issue such a decree. So far, 47 senators have signed the petition, he added.