The dispute between the government and the Bank of Thailand (BoT) intensified on Sunday when Prime Minister Srettha Thavisin stood by Pheu Thai leader Paetongtarn Shinawatra, who recently criticised the central bank’s stance on interest rates.
Speaking at an event on Friday at Pheu Thai’s headquarters, Ms Paetongtarn weighed in on the dispute between Mr Srettha and the BoT, which has refused to bow to his constant pressure to cut interest rates.
She criticised the BoT, saying its independence from the government was hindering efforts to boost the economy.
“The law that keeps the Bank of Thailand independent from the government is a problem and a major obstacle in solving economic problems,” she said.
Ms Paetongtarn said the country has relied heavily on fiscal policy to shore up the economy, which has resulted in high public debt and budget deficits.
“If the BoT doesn’t understand and cooperate with the government [in its efforts to tackle economic problems], we can’t [win],” she said.
The government has repeatedly urged the BoT to consider revising its interest rate policy and lowering the benchmark rate to stimulate the economy. Mr Srettha previously said the current rate of 2.5%, a 10-year high, is hurting the public and may exacerbate the nation’s high household debt.
Mr Srettha on Sunday reiterated that interest rates are an important issue as high rates impose financial burdens on people.
‘’What Ms Paetongtarn said is a reflection of the public mood. Personally, I understand the BoT’s independence. I believe I can work with the BoT. I have always respected it,” Mr Srettha said.
‘’The government believes the interest rates should be cut, but the BoT governor has reason not to. From now on, the government will hold talks with four major banks to ask them to reduce their interest rates.
‘’Independence [of the BoT] is one thing. But we must not forget that whether you are civil servants, politicians, or a financial institution, you work for the sake of the people. We have different approaches to solving problems. Everyone can criticise everyone,” the prime minister said.
He said he would meet the newly appointed Finance Minister, Pichai Chunhavajira, to discuss how to coordinate with the BoT to ensure the government can work more efficiently with the central bank.
Mr Srettha denied accusations the government has been pressuring the BoT to bow to its calls for lower interest rates. ‘’We only relay public needs to the BoT,” he said.
Sirikanya Tansakul, a deputy leader of the opposition Move Forward Party, said Ms Paetongtarn’s criticism of the BoT is nothing new.
‘’Ms Paetongtarn’s remarks will not create any more pressure on the BoT, as the prime minister already took aim at the BoT for refusing to comply with the government’s policy.
“However, as Pheu Thai leader, Ms Paetongtarn’s remarks could have some implications as the ruling party may use its majority in parliament to push for an amendment to the Bank of Thailand Act to curb the BoT’s independence,” Ms Sirikanya said.
‘’This will be a major issue, and the public as well as foreign investors will keep an eye on whether the BoT will be able to maintain its independence,” she said.
‘’It is wrong to force the BoT to fall in line with government goals. It is also incorrect to think that the BoT’s independence is an obstacle to fixing economic problems.”
Commerce Minister Phumtham Wechayachai said on Sunday the BoT is not above criticism.
‘’It is not an agency that cannot be criticised. Ms Paetongtarn’s criticism shows she is sincere and concerned that the BoT’s refusal to cut interest rates will affect people,’’ he said.