The government is more worried about financial access than interest rates, Finance Minister Pichai Chunhavajira said on Thursday.
Access to lending and liquidity for retail borrowers and small businesses are more important than the level of the interest rate, Mr Pichai told reporters after his first meeting with Bank of Thailand Governor Sethaput Suthiwartnarueput since his appointment as finance minister last month.
The country’s financial institutions are strong and they have the scope to ease rules for various “sensitive groups” of borrowers, he said.
“What the government is concerned is about access to lending,” said Mr Pichai, a former chairman of the Stock Exchange of Thailand. “The first thing people want today is access to lending. If they need to choose between a lower rate by half a percentage point and access to lending, they will choose access.”
He made the comments after spending some two hours talking with Mr Sethaput about ways to coordinate fiscal and monetary policies.
He said the meeting helped the two understand each other’s position better. “We speak the same language and we have no problems. We had a good discussion today.”
The meeting came amid a long-running public disagreement between the government and the central bank over interest rates
The central bank will review its current inflation rate target of 1% to 3% and it was free to decide on key rates, Mr Pichai said.
“The policy rate is something people outside Thailand are looking at,” he said. “We will not touch this issue as it involves many factors,” the minister said, adding that BoT would use its tools to analyse the inflation trend and how to manage it within the target agreed between the central bank and the Ministry of Finance.
Consumer price inflation rose 0.2% in April, the first increase after seven months of contraction. The government had argued that the central bank could no longer justify using inflation risk as a reason to leave interest rates unchanged.
High interest rates and near-record household debt levels have contributed to an uptick in non-performing loans, prompting lenders to be more cautious in granting fresh loans. Tighter lending rules for automobile and other consumer durable purchases have led to a cooling in private consumption, central bank data show.
Mr Pichai said he also discussed economic restructuring with the central bank governor, adding that the two would speak more often.
For months, Prime Minister Srettha Thavisin has pushed for an interest rate cut, saying it would help the economy. The central bank has not bowed to the pressure, holding its key rate at a more than decade-high of 2.50%. The next rate review is on June 12.
Mr Sethaput has argued that cutting interest rates would not do much to fix the economy, which in his view needs fundamental reforms.
Mr Pichai, who was appointed finance minister last month, has downplayed the disagreement, saying last week there would be no attempt to replace the central bank governor or weaken its independence.
The minister said he and the central bank governor did not discuss the government’s 500-billion-baht digital wallet plan or other fiscal policies.
Mr Sethaput and many other economists have been critical of the digital wallet plan. They say giving away 10,000 baht to 50 million people to spend in their communities might give the economy a short-term boost but would not do much beyond that.
Thailand’s economy is estimated to have expanded by just 0.7% in the first quarter, according to a Bloomberg survey, making it the slowest pace in the region where peers are on a pace of 4% plus growth.
Official figures are scheduled to be released on Monday by the National Economic and Social Development Council.