Exim Bank raps central bank policy
The Bank of Thailand should end the 30 per cent reserve requirement and the fully hedged measure and reduce the policy interest rate by a half percentage point at the Monetary Policy Committee’s meeting on April 11 to stimulate the economy, according to the Export and Import Bank of Thailand (EXIM Bank).
EXIM Bank chairman Narongchai Akrasanee said he saw a need for the central bank to give up both measures because they made the baht move separately in the onshore and offshore markets.
Under the circumstance, exporters are unable to assess the baht movement.
He conceded the baht might strengthen in an initial period if the central bank decided to end both measures.
However, the currency would then weaken since foreign funds lack confidence in many measures taken in Thailand and planned to shift their investment into other countries.
The capital inflows into Thailand are likely to lessen because the country’s credit rating tended to be lower.
“Confidence in Thai businesses among foreign investors has declined because of political uncertainties and harsh measures to curb the capital inflows.
“Some investors have adopted a wait-and-see attitude for clear direction and others shift their investment into other countries because they are bored with the situation in Thailand,” he said.
Mr. Narongchai suggested the central bank adopt the monetary policy to stimulate the economy.
He said the bank had been too slow to cut the policy interest rate in the past. So, it should cut the rate by 0.50 per cent at the next meeting of MPC on April 11.
The sharp interest cut should be done together with the cancellation of the reserve withholding and the fully-hedged measure if the bank did want to stimulate the country’s economy efficiently.
He noted the implementation of the fiscal measure by accelerating the budget disbursement failed to jumpstart the economy because government officials are inactive in disbursing the budget for fear that they might be sued unless disbursement-related documents are complete.