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Thailand’s new finance minister has a chance to improve tense ties with the central bank, says former finance minister
(Correct spelling in penultimate paragraph)
By Anisha Sircar and Divya Chowdhury
BENGALURU (Reuters) – Thailand’s new finance minister has refrained from putting pressure on the central bank and has a chance to improve relations amid a long-running disagreement over interest rates, former finance minister Thirachai Phuvanatnaranubala said on Monday. Tuesday.
Speaking at the Reuters Global Markets Forum, Thirachai said Prime Minister Srettha Thavisin’s repeated public push for a rate cut had created unnecessary tension and new Finance Minister Pichai Chunhavajira was in a position to smooth things over.
“The new finance minister should try to find a way to convince the Bank of Thailand that there is a need for a more relaxed monetary policy,” Thirachai, who is also a former deputy governor of the central bank, told the Reuters forum.
For months, Srettha has been at loggerheads with the central bank, which has refused to bow to his pressure to cut rates, currently at their highest level in more than a decade at 2.50%. The next tariff review will be on June 12th.
Srettha and his ruling party, Pheu Thai, say the current stance of monetary policy is harming an economy that he says is in crisis. Srettha, a real estate tycoon and political newcomer, has repeatedly said he respects the central bank’s independence.
Pheu Thai and previous incarnations, also founded by influential former prime minister Thaksin Shinawatra, have dominated politics over the past two decades and previously clashed with the BOT on fees.
Billionaire Thaksin has officially retired, but remains an important figure in Thai politics, with influence over the current government.
His political daughter and Pheu Thai leader Paetongtarn Shinawatra recently caused a stir, calling BOT’s independence an “obstacle” in resolving economic problems.
STRONG POSITION
Thirachai was on the BOT the last time a Thai central bank governor was fired in 2001 by Thaksin, a move he said would be difficult to repeat now.
“The governor’s position is quite strong because Thailand has a tradition of giving weight and protection to the Bank of Thailand,” he said.
“We had changed the law to make it difficult for the government, any government, to remove the governor of the central bank unless there is a real, apparent and necessary cause.”
The new Minister of Finance, Pichai Chunhavajira, recently said that he is more concerned about people’s access to finance than the level of interest rates. On Tuesday, he reiterated the government’s position that economic stimulus was necessary.
Thirachai said he believes the current interest rate of 2.50% is perhaps a little high and, in his opinion, monetary policy should be more relaxed.
The story continues
He said there should be no concern about the weakness of the baht currency if there was a rate cut.
The BOT stated that a rate cut could give a boost to the economy in the short term, but this benefit would be offset by the potential long-term negative impacts it could create on the economy, which needed to be restructured.
(This story has been redone to correct spelling in the penultimate paragraph)
(Reporting by Anisha Sircar in Bengaluru and Divya Chowdhury in Mumbai; Additional reporting by Chayut Setboonsarng and Orathai Sriring in Bangkok; Editing by Martin Petty)