Finance minister wants to replace central bank director

Minister Kittiratt Na-Ranong.

The decision is made. Finance Minister Kittiratt Na-Ranong has finally admitted that he would rather lose Bank of Thailand Governor Prasarn Trairatvorakul than get rich.

The reason has long been an open secret: the central bank refuses the so-called policy rate for fear of fueling inflation. Kittiratt wants the policy rate lower, because he feels the hot breath of the exporters who complain about the expensive baht. In addition, the growth forecast of the Ministry of Finance is in jeopardy. According to the minister, lowering interest rates would put an end to the inflow of foreign capital, which he considers responsible for the price increase.

Economists and former Treasury Secretary Korn Chatikavanij dispute Kittiratt's view. Even if interest rates fall, foreign capital will continue to flow into the country, because most of it will go to the stock and equity markets. According to Korn, the Thai policy rate not extremely high at all. 'Many other countries in the region have higher ones policy rates than thailand. A reduction in the policy rate is not the solution to the baht's appreciation," he says.

Kittiratt has long been making every effort to influence central bank monetary policy. At present, the policy rate (from which the banks derive their interest rates) 2,75 percent; the minister wants to take 1 percent off. In financial circles, Kittiratt's political interference is frowned upon. By the way, it's not even easy to hump the governor of the central bank. This is only possible if he breaks the law or is guilty of misconduct or gross negligence.

Kittiratt made his controversial statement Thursday during a discussion with Korn about Thailand's future economy. Prasarn was unavailable for comment. He was appointed in 2010 for a term of 5 years.

(Source: website bangkok mail, April 19, 2013; Bangkok Post, Apr 20, 2013)