Prawit walks back baht comments

Prawit walks back baht comments

Acting PM says he will respect central bank independence in currency management

(AFP Photo)
(AFP Photo)

Acting prime minister Prawit Wongsuwon, who earlier this week called for measures to halt the baht’s slide, said on Thursday the government won’t meddle with the central bank and how it handles the currency.

Gen Prawit, who is occupying the PM's post pending a Sept 30 Constitutional Court ruling on the tenure of Prime Minister Prayut Chan-o-cha, said he had directed Finance Minister Arkhom Termpittayapaisith to “only talk” to the Bank of Thailand about the baht’s recent slump.

The clarification was an attempt to walk back remarks on Tuesday when Gen Prawit said he wanted the baht back at 35 to a dollar.

Mr Arkhom, a technocrat-turned minister, was more cautious in his comments, saying the government has a limited role in shielding the currency. 

Commenting after a meeting on Thursday with central bank officials, he said any interest rate increases must weigh inflation, growth and capital movements.

The central bank is expected to raise its key rate again on Sept 28 after hiking it in August for the first time in nearly four years by a quarter point to 0.75%, to curb inflation.

Three other Southeast Asian central banks — in Indonesia, the Philippines and Vietnam — raised their key rates on Thursday in a bid to shore up their currencies and keep inflation in check.

The baht has lost about 10.6% this year against the surging dollar. Its weakness is, however, benefiting exports, Mr Arkhom said, adding that the government would continue to help with energy prices and living costs.

The minister told reporters the central bank had reported some capital outflows but that they were not substantial.

The economy is still expected to grow by 3% to 3.5% this year, helped by a rebound in the important tourism sector, which should see 8 million foreign visitors this year, he said. 

Emerging markets such as Thailand are struggling to sustain an economic recovery amid the US dollar’s strength, following the Federal Reserve’s resolve to lift interest rates further to fight inflation.

The baht fell as much as 0.6%  to 37.383 to a dollar on Thursday, the lowest since October 2006. Most of its losses this year have come since the start of the war in Ukraine, when prices of energy and food commodities started to soar, fuelling inflation that central banks in major economies have struggled to contain.

The Bank of Thailand has repeatedly said it is closely monitoring the baht and may take steps to curb excessive volatility, noting that dollar strength was hitting other currencies hard as well.

While the plunging baht may not have much impact on Thai businesses due to their low foreign debt, the cost of funds will increase with interest rates going up, said Sarath Ratanavadi, chief executive of Gulf Energy Development Plc.

“The era of cheap borrowing costs will probably be gone for a long time,” said Mr Sarath, the second-richest person in Thailand with a net worth to $12.4 billion. “We’ll have to prepare our business plan to deal time of high interest rates.”

Do you like the content of this article?

Thai spikers struggle against Serbia

Thailand’s second-round struggles continued on Friday with a straight-sets loss to powerhouse Serbia at the FIVB Women’s World Championship in Lodz, Poland.


Grief and questions

As funerals for Uthai Sawan massacre victims begin, PM visits families and pledges help, while police look for clues that could explain what triggered killer's rage.


Children slain as they slept

NONG BUA LAMPHU: It was nap time at the Uthai Sawan Child Development Centre and 24 children aged 2 to 5 years were bedded down at evenly spaced spots on the wood-panelled floor.