Policymakers weigh baht options
Uttama says measures to curb the currency's run-up should be used at the right time
Policymakers still have monetary and fiscal policy space to rein in the stronger baht, but it will be used when appropriate, says Finance Minister Uttama Savanayana.
The government has no policy to impose tax measures to taper the baht's strength, as both fiscal and monetary policy have room to manoeuvre, Mr Uttama said.
Related agencies have closely discussed the baht issue, he said, but it is the Bank of Thailand's mandate to handle it.
The baht, which was the best-performing Asian currency with an almost 9% gain versus the US dollar in 2019, climbed above the 30-mark in pre-New Year trade before retreating past the psychological level since Thursday amid speculation that the central bank had stepped in to curb the baht's strength.
The local currency is down about 0.8% against the greenback so far this year, trading at 30.15 on Friday.
Vachira Arromdee, assistant governor of the central bank, said recently that the bank would closely monitor the baht's movement, while the minutes for the Dec 18 meeting of the Monetary Policy Committee (MPC) showed that the baht's appreciation against trading partners' currencies remained a key concern.
After the MPC cut the policy rate twice last year to match the record low of 1.25%, the market estimated that it could ease monetary policy further -- but space is limited.
Mr Uttama said policymakers have not ruled out measures to curb the baht's run-up, but they should be used at the right time.
"We have the capability to use both fiscal and monetary policies, depending on which one is proper," he said. "We always talk to each other, but we can't identify which measure will be imposed, as it needs thorough consideration. Any measures have both negative and positive impacts."
The planned formation of two committees, one an advisory committee for financial stability policy and the other a monetary committee for development, will seek the cabinet's approval. Ministers or the central bank governor will chair the committees.
The committees' establishment will be a boon to the country because they can serve as stages for related agencies to share information and brainstorm, Mr Uttama said, noting that other countries also have such committees.
The finance minister said the baht's gain carries pros and cons, dealing a blow to the country's exports while at the same time benefiting investment and raising competitiveness in terms of machinery, technology and human resources.
Mr Uttama said the economy needs a structural revamp to raise competitiveness.
Value-added production should replace upstream manufacturing, he said, as it enables the country to have higher bargaining power, while technology will help cut costs and hone the skills of the workforce.