Prime Minister Srettha Thavisin's administration is discussing ways to exert more control over the Bank of Thailand (BoT) after repeatedly clashing with the monetary authority on economic policy, according to people familiar with the matter.
One of the measures under discussion focuses on the BoT's board chairman role, which will open up in September, the people said. While the chairman does not have powers to dictate monetary policy, the official can evaluate the BoT governor Sethaput Suthiwartnarueput's performance as well as have a say in which outside experts join the Monetary Policy Committee (MPC).
Kittiratt Na-Ranong, a former finance minister-turned-adviser to Mr Srettha, and Supavud Saicheua, an outspoken critic of the central bank and former adviser to ruling Pheu Thai Party, are among those in consideration for the BoT chairman’s job, the people said, requesting anonymity as the discussions are private.
Porametee Vimolsiri, who completes his term as head of the BoT board in September, was appointed by the erstwhile military-led establishment, which also picked the current governor. The BoT’s seven-member MPC comprises three central bank officials, including the governor, and four external members.
When Mr Sethaput’s term ends in September 2025, the government will push for a new governor who is likely to be more sympathetic and aligned with its views, the people said. Mr Srettha's administration will have a say in who succeeds him, with the finance minister tasked with appointing a search committee.
Government spokesman Chai Wacharonke said he could not comment on the issue as he was not aware of the move, while a BoT representative declined to comment. Mr Kittiratt and Mr Supavud did not respond to phone calls and text messages seeking comments.
The discussions on gaining more influence over the central bank follow growing differences between Mr Srettha and Mr Sethaput on approaches to revive the US$500 billion economy, which has grown an average 1.9% in the past decade — a pace far slower than its regional peers. While the government has favoured cutting rates from a decade-high 2.5% to boost consumption and growth, the central bank has instead advocated structural reforms to aid the economy.
Pheu Thai Party leader Paetongtarn Shinawatra addresses a party meeting on May 3, 2024, in Bangkok. (Photo: Pattarapong Chatpattarasill)
The disagreement prompted Paetongtarn Shinawatra, daughter of former premier Thaksin Shinawatra and head of Pheu Thai party, to publicly blame the BoT's autonomy as an "obstacle" to revitalising Southeast Asia's second-largest economy. Within weeks, Finance Minister Pichai Chunhavajira called for a review of the central bank's inflation target, saying it needs to reflect current economic conditions — which the people familiar said was a pressure tactic to get the BoT to adjust monetary policy.
This is not the first time that a ruling party linked to Thaksin has clashed with the central bank. In 2001, Thaksin fired the then BoT governor after the official defied his call for interest rate adjustments. In 2013, Mr Kittiratt, who was finance minister in Yingluck Shinawatra's cabinet, had publicly pressured the then central bank head Prasarn Trairatvorakul to cut rates.
The latest dispute has weighed on Thailand’s financial markets with foreign investors offloading the nation's currency and equities. Global funds have pulled out almost $3 billion from local stocks and bonds so far this year, while the baht is among the biggest losers during the period, in part due to the dollar's strength.
Mr Sethaput and his team have so far resisted political pressures, with deputy governor Alisara Mahasandana last week defending the BoT's 1%-3% inflation goal as "appropriate," although price gains have been well below the floor of its target range for 12 straight months.
The BoT is expected to keep the policy rate steady for a fourth straight meeting on June 12, with economists including from Goldman Sachs Group Inc and CIMB Group Holdings Bhd pushing back their calls for rate cut to later this year or to 2025.
Fiscal push
Under BoT's rules, the chairman and MPC members are appointed for a three-year term and eligible for reappointment for a maximum of six years. While the current chair Porametee is serving his second term, the outside members of MPC will complete their term in October 2026.
In the absence of monetary policy support, the government is pressing ahead with fiscal measures to stimulate the economy, including an about $14 billion digital wallet scheme to handout 10,000 baht ($273) in cash each to some 50 million adult Thais for them to spend on a range of goods and services.
But rising political uncertainty with Mr Srettha and Thaksin facing legal scrutiny in separate cases has cast a shadow over the government's plans to revive the economy. Citigroup Inc and Nomura Holdings Inc said last week the handout is at risk of being derailed by the political turmoil.
Mr Srettha's aides have also sought to pile pressure on the BoT by demanding that the central bank take steps to lower the net interest margin charged by commercial lenders. The premier is also weighing shifting banking regulatory powers from the BoT to a new agency as part of an overhaul of the civil service, Thai-language newspaper Krungthep Turakij reported in May.
The Finance Ministry has also floated the idea of shifting about 570 billion baht of liability on the government account — incurred from bailing out financial institutions after the Asian financial crisis — to the central bank. Such a move will lower the ratio of public debt-to-GDP, currently capped at 70%, and allow the government to borrow more and stimulate the economy.
Bank of Thailand. (Photo: Varuth Hirunyatheb)
