The Bank of Thailand expects its interest income will outpace that paid out this year following global interest rate hikes, making its performance from interest spread swing back to profit for the first time in several years.
The central bank's loss from paying higher interest on bond issuance than it earned from foreign reserve investment was narrowed to 15.1 billion baht last year from 29.1 billion in the previous year, said Chantavarn Sucharitakul, assistant governor for corporate strategy and relations group.
Central bank data put its loss from its sterilisation operations at 44.8 billion baht in 2015, 62.6 billion in 2014, 96.5 billion in 2013 and 100 billion in 2012.
Such loss is part of the Bank of Thailand's 2017 loss amounting to 271 billion baht, most of which resulted from valuation loss from holding foreign reserves.
The accounting standard requires the Bank of Thailand to record the value of foreign reserves based on baht terms at the end of every year. The valuation plays an important role for the bank's fluctuating operating performance as 85% of international reserves are in foreign-denominated currencies, she said.
The baht always becomes stronger (against the US dollar) when the country's economy grows, and the central bank then sees an accounting loss, said Mrs Chantavarn.
Based on the Bank of Thailand's foreign reserves plus net forward position totalling US$240 billion (7.68 trillion baht) at the end of last year, it would post the valuation profit of 240 billion baht for every one baht appreciation against the greenback when foreign reserves are booked in baht terms.
She said the central bank had a valuation loss of 200 billion baht last year as the baht strengthened to 32.66 at the end-2017 from 35.82 a year earlier.
"The Bank of Thailand carries out monetary policy to correct financial markets and prevent foreign exchange from fluctuating rapidly, which would hamper economic recovery," she said.
Mrs Chantavarn insisted the valuation loss poses no threat to external stability.