Thai Government’s Bid to Influence Central Bank Hits Roadblock
The Thai government’s campaign to pressure the Bank of Thailand (BOT) to cut interest rates suffered a significant setback, with the Office of the Council of State effectively ruling that the official nominee to be chairman, former finance minister Kittiratt Na-Ranong, is not suitable.
Office of the Council of State’s Ruling
Without directly naming Kittiratt, Secretary-General Pakorn Nilprapunt said that “Mr K’s” role as an adviser to the prime minister means he is a “person holding a political position” who was appointed for political reasons, and who is involved with government administration. He is therefore not qualified to be chairman, Pakorn said.
Implications of the Ruling
While the chair of the BOT is not involved in monetary policy meetings, they can evaluate the governor’s performance and also have a say in which outside experts join the seven-member rate panel. The council’s legal opinion means that if the government tries to push ahead with Kittiratt’s appointment, it could face political risks and challenges.
Government’s Response
The government has not immediately commented on Friday’s (Dec 27) announcement, which comes just three days after the Thai Post, citing the finance permanent secretary, reported that the council had decided Kittiratt was unqualified.
Background
The Thai government has been looking for ways to increase its influence over the central bank, and Bloomberg News reported in June that it was considering using the chairman’s role as a means of gaining leverage.
Central Bank’s Stance
The BOT has cut its benchmark rate by a quarter point this year, to 2.25 per cent, but at its most recent meeting held borrowing costs unchanged. The government wants lower borrowing costs to reduce the burden of household debt, but BOT policymakers say rates are appropriate and other measures are needed to boost growth.
Conclusion
The Office of the Council of State’s ruling is a significant setback for the Thai government’s bid to influence the Bank of Thailand and pressure it to cut interest rates. The government’s nominee for chairman, Kittiratt Na-Ranong, has been deemed unsuitable for the role, and the government may face political risks and challenges if it tries to push ahead with his appointment.
FAQs
Q: What is the significance of the Office of the Council of State’s ruling?
A: The ruling effectively blocks the government’s nominee for chairman of the Bank of Thailand, Kittiratt Na-Ranong, from taking up the role.
Q: Why was Kittiratt deemed unsuitable for the role?
A: According to Secretary-General Pakorn Nilprapunt, Kittiratt’s role as an adviser to the prime minister and his involvement with government administration make him a “person holding a political position” who is not qualified to be chairman of the BOT.
Q: What are the implications of the ruling for the government?
A: The government may face political risks and challenges if it tries to push ahead with Kittiratt’s appointment, and may need to consider alternative nominees for the role.
Q: What is the current stance of the Bank of Thailand on interest rates?
A: The BOT has cut its benchmark rate by a quarter point this year, to 2.25 per cent, but at its most recent meeting held borrowing costs unchanged.
