Former prime minister Thaksin Shinawatra has called on the Bank of Thailand to increase liquidity by reducing its bond sales to help the economy.
Since May, he said, the central bank has been draining about 1% of the liquidity from the system each month, which has negatively affected the economy and reduced the incentive for commercial banks to lend to small businesses.
Banks are not motivated to lend money to stimulate the economy because they can earn risk-free interest by purchasing Bank of Thailand bonds, as opposed to lending in an uncertain economic environment, he said during his “Vision for Thailand” presentation on Thursday night.
He suggested that the central bank maintain a level of liquidity in the system that forces commercial banks to more actively lend money, thereby driving economic growth.
“Right now, the provincial economy is like a fish in a pond, with someone gradually draining the water, leaving the pond nearly dry, and the fish are on the verge of dying,” the father of Prime Minister Paetongtarn Shinawatra said.
He proposed that the finance minister negotiate with the Thai Bankers’ Association and the Bank of Thailand to better align fiscal and monetary policies, while still respecting the independence of the central bank.
“It’s not that the Bank of Thailand cannot withdraw money from the system at all, but there should be discussions about what level is appropriate,” he added.
