By Naewna and Reuters – published by CNA
AFTER Paetongtarn Shinawatra, leader of the ruling Pheu Thai party, was criticised for saying Bank of Thailand’s independence was an “obstacle” in resolving economic problems yesterday (May 3) the party’s Secretary-General and MP Ms. Linthiporn Warinwatchararoj today denied she was interfering with the central bank.
Linthiphon said while the central bank can perform independently as it is not a state agency to which the government could directly issue orders it is nevertheless still a public institution with powers and duties to supervise national finances and this must be conducted in line with the actual economic conditions of this country taking the monetary policy committee’s views into account.
She added that Prime Minister Srettha Thavisin had called on the central bank to cut the interest rate for the following reasons:
– In fiscal 2023 all nine commercial banks posted a net profit of 226.571 billion baht, an increase of 33.635 billion baht, or 17.4%, which is a high profit indicating that the interest rate could be reduced;
– Although the US Federal Reserve’s policy rate affects exchange rates, trade, and financial markets, the Thai central bank does not always have to adjust interest rates in step with the Fed and must consider other factors of the domestic economy;
– In the past the government only discussed and requested that commercial banks consider reducing interest rates but it is at their discretion whether to do so.
Patongtarn’s comment was the latest salvo in an ongoing row over interest rates between Srettha and the central bank, which has refused to bow to his constant pressure to cut rates.
“The law that keeps the Bank of Thailand (BOT) independent from the government … is a problem and a significant obstacle in fixing economic problems,” Paetongtarn told party members.
Srettha maintains an interest rate at a decade high of 2.50 percent was hurting small businesses and hamstringing government efforts to jumpstart an economy he says is in crisis. Srettha insists he respects the BOT’s independence.
Paetongtarn, who has been tipped as a potential leader of Thailand, said the BOT’s monetary policy “refuses to understand and cooperate” and would hamper efforts to reduce high levels of debt.
The central bank declined to comment on Paetongtarn’s remarks when contacted by Reuters.
Its governor Sethaput Suthiwartnarueput on Monday said the BOT would not bow to pressure. He told CNBC the current interest rate was appropriate for the economy and any short-term boost a rate cut could give was “not an efficient trade-off” when weighed against longer-term unintended consequences.
Comments from Paetongtarn carry weight in Thailand, with her father Thaksin Shinawatra the billionaire figurehead of a party that has long dominated politics, winning all but one election in the past two decades.
In his first term in office, Thaksin sacked the central bank governor over monetary policy disagreements.
He is still a towering figure in Thailand and made a dramatic return home in August after 17 years in self-exile to face a jail sentence for conflicts of interest and abuse of power.
He was released in February on parole after six months in detention and maintains he has retired from politics.
CAPTIONS:
Pheu Thai leader Paetongtarn Shinawatra and Prime Minister Srettha Thavisin. Top photo:Thai Rath, Front Page photo: Reuters and published by CNA
Insert: Bank of Thailand Governor Sethaput Suthiwartnarueput. Photo: Thai Rath
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