ID :
146161
Sat, 10/16/2010 - 13:16
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Shortlink :
http://m.oananews.org//node/146161
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Businessmen urge Thai central bank to cut RP rate to curb baht appreciation against dollar
BANGKOK, Oct 16 -- The Federation of Thai Industries (FTI) and business associations have issued a seven-point proposal, including a reduction of the benchmark interest rate by a minimum of 50 basis points from the current 1.75 per cent, to the Bank of Thailand (BoT) and the Ministry of Finance, aimed at curbing huge foreign capital inflows entering Thailand and slowing down the baht appreciation against the US dollar, according to FTI chairman Payungsak Chartsutipol.
The requests were made following a meeting Friday between the FTI and business associations as the BoT Monetary Policy Committee is scheduled to meet Wednesday to discuss whether to increase the policy interest rate--which now stands at 1.75 per cent --in order to contain the baht appreciation against the dollar following a substantial foreign capital influx entering Thailand.
The sharp appreciation of the baht has prompted the finance ministry to introduce a 15 per cent withholding tax on capital gains from foreign bond holdings earlier this week but the measure has failed to deter the influx as the baht continued to surge against the weak dollar.
FTI and the business associations said the proposed cut in the RP rate should continue at least until the first quarter of 2011 as the current rate is not a vital factor that would cause inflation to rise significantly and this could also be seen from rates charged by most commercial banks which had not been increasing to the same level as central bank rates.
There is no reason why financial institutions should refrain from making loans or persuading the public on overspending which could cause a bubble economy like before.
Inflation in Thailand in 2011 is expected to stand at 3.2 per cent, and even if interest rates contract, it would be insignificant to the country’s economy and unusual to foreign capital inflows under the global currencies volatility, said Mr Payungsak.
Other proposals made by FTI and other business associations include that the central bank and the ministry should form a joint working committee with the private sector to implement measures issued earlier into “reality” to prevent speculation by foreign business. BoT must control the baht volatility and prevent speculation in the capital and the bond markets.
It should also issue a regulation limiting the borrowing of baht which would be exchanged into dollars as speculation as well as issue a temporary measure on collecting fee of between 2- 4 per cent on short-term foreign capital inflows now practiced by several countries in order to deter huge inflows until they return to normal.
The baht traded at Bt29.80 – 29.84 against the dollar late Friday, unchanged from Thursday. (MCOT online news)
The requests were made following a meeting Friday between the FTI and business associations as the BoT Monetary Policy Committee is scheduled to meet Wednesday to discuss whether to increase the policy interest rate--which now stands at 1.75 per cent --in order to contain the baht appreciation against the dollar following a substantial foreign capital influx entering Thailand.
The sharp appreciation of the baht has prompted the finance ministry to introduce a 15 per cent withholding tax on capital gains from foreign bond holdings earlier this week but the measure has failed to deter the influx as the baht continued to surge against the weak dollar.
FTI and the business associations said the proposed cut in the RP rate should continue at least until the first quarter of 2011 as the current rate is not a vital factor that would cause inflation to rise significantly and this could also be seen from rates charged by most commercial banks which had not been increasing to the same level as central bank rates.
There is no reason why financial institutions should refrain from making loans or persuading the public on overspending which could cause a bubble economy like before.
Inflation in Thailand in 2011 is expected to stand at 3.2 per cent, and even if interest rates contract, it would be insignificant to the country’s economy and unusual to foreign capital inflows under the global currencies volatility, said Mr Payungsak.
Other proposals made by FTI and other business associations include that the central bank and the ministry should form a joint working committee with the private sector to implement measures issued earlier into “reality” to prevent speculation by foreign business. BoT must control the baht volatility and prevent speculation in the capital and the bond markets.
It should also issue a regulation limiting the borrowing of baht which would be exchanged into dollars as speculation as well as issue a temporary measure on collecting fee of between 2- 4 per cent on short-term foreign capital inflows now practiced by several countries in order to deter huge inflows until they return to normal.
The baht traded at Bt29.80 – 29.84 against the dollar late Friday, unchanged from Thursday. (MCOT online news)
