BANGKOK: Thailand’s new Finance Minister Pichai Chunhavajira (pic) urged the central bank to support government policies, signalling pressure may continue on the Bank of Thailand to cut interest rates.
"It’s our duty and responsibility for me and BOT (Bank of Thailand) to work together to push both engines - monetary and fiscal policies in the same direction,” Pichai told reporters on Tuesday (May 7) in his first remarks as finance chief. "But before that we need to understand each other and realise what are the problems.”
Tensions between the government and the central bank have flared up again after Paetongtarn Shinawatra, the head of Thailand’s ruling party, said days ago that the BOT’s autonomy posed an "obstacle” to reviving South-East Asia’s second-largest economy.
Prime Minister Srettha Thavisin had been pushing for a rate cut, which the BOT had repeatedly resisted, saying that lower borrowing costs won’t fix the problems.
Pichai’s comments today may dent hopes that Srethha’s stepping down from the finance job will ease those tensions, which had roiled investor sentiment.
Asked whether he thinks the BOT should be under the supervision of the government, Pichai said the central bank has always been independent in its decision-making, though he added that monetary policy must help support the government’s agenda.
Even so, Srettha said in separate remarks on Tuesday he is "confident” both fiscal and monetary policymakers are trying to communicate. Any move to reduce conflict between the government and central bank is "appropriate,” he said.
"Everybody can have different ideas, but we can talk and crystallise,” said Pichai, who’s concurrently deputy PM for economy, indicating his plans to have a discussion with the central bank. "I believe the idea will be narrow and lead to a good solution.”
The BOT, which has kept borrowing costs at a decade high of 2.5%, said last month that the decision has given it "policy optionality” to deal with currency volatility, geopolitical risks and uncertainties from the Federal Reserve.
The new finance chief also said he will look into the BOT law and evaluate whether it has problems, replying to a question on whether he will seek to amend the legislation that mandates central bank independence.
Last Friday, Paetongtarn, the daughter of Thaksin Shinawatra, also described the central bank’s monetary policy as ineffective, saying that higher public debt was the result of an overuse of the fiscal policy to prop up the economy. - Bloomberg
