Thailand to Name Critic as Central Bank Chair, Reports Say
Monday, Nov 11, 2024 5:44 am ET
2min read Thailand is set to appoint a known critic of the central bank governor as the new chair of the Bank of Thailand's (BOT) board, raising concerns about political interference and the institution's independence. According to reports, the ruling Pheu Thai Party has nominated former Finance Minister Kittiratt na Ranong for the position, despite concerns from economists and former governors about the potential impact on long-term economic stability.
Kittiratt, who served as finance minister from 2012 to 2014, has a history of clashing with the central bank over monetary policy. As a vocal critic of the current governor, Sethaput Suthiwartnarueput, Kittiratt has backed the government's repeated demands for a rate cut, which the BOT had resisted until a surprise cut last month. The appointment of Kittiratt, who is seen as a loyalist of the ruling party, has sparked worries about the BOT's ability to maintain its independence and make unbiased decisions.
The BOT chair, while not directly influencing interest rates, selects the monetary policy committee, which includes the governor, two deputy governors, and four outside experts. The chairman also has some influence on the selection of the next BOT chief when the incumbent's term ends in September 2025. Economists and former governors have warned that if the board chairman or members use their power to serve short-term political interests, it could have a negative impact on economic stability and may cause irreparable damage.
The BOT's independence is crucial for maintaining monetary stability and public trust. The institution has been under pressure from the government to slash interest rates, which had been held steady at a decade-high for a year until the surprise cut last month. The BOT's refusal to budge on rates has drawn criticism, including from Pheu Thai's leader Paetongtarn Shinawatra, who described the central bank's independence as an "obstacle" in May.
The appointment of Kittiratt comes amid concern from economists and four former central bank governors over the government's nomination and its ability to influence the monetary authority. In an open letter, they warned that if successful in getting its candidate as board chair, the ruling party might push for its nominee as governor next year.
Thailand's economy is projected to recover in 2024, supported by sustained private consumption as well as tourism and goods exports recovery. Growth is projected to accelerate from 1.9 percent in 2023 to 2.4 percent in 2024. However, the appointment of a government loyalist as the BOT chair could introduce uncertainty and potential risks to the economic outlook.
In conclusion, the appointment of Kittiratt na Ranong as the new chair of the Bank of Thailand's board raises concerns about political interference and the institution's independence. While the BOT chair cannot directly influence interest rates, the board selects the monetary policy committee and has some influence on the next governor's appointment. Maintaining the central bank's independence and credibility will be crucial to ensure effective monetary policy and long-term economic growth. The government should prioritize transparency and communication to mitigate potential risks and ensure a smooth transition.
Kittiratt, who served as finance minister from 2012 to 2014, has a history of clashing with the central bank over monetary policy. As a vocal critic of the current governor, Sethaput Suthiwartnarueput, Kittiratt has backed the government's repeated demands for a rate cut, which the BOT had resisted until a surprise cut last month. The appointment of Kittiratt, who is seen as a loyalist of the ruling party, has sparked worries about the BOT's ability to maintain its independence and make unbiased decisions.
The BOT chair, while not directly influencing interest rates, selects the monetary policy committee, which includes the governor, two deputy governors, and four outside experts. The chairman also has some influence on the selection of the next BOT chief when the incumbent's term ends in September 2025. Economists and former governors have warned that if the board chairman or members use their power to serve short-term political interests, it could have a negative impact on economic stability and may cause irreparable damage.
The BOT's independence is crucial for maintaining monetary stability and public trust. The institution has been under pressure from the government to slash interest rates, which had been held steady at a decade-high for a year until the surprise cut last month. The BOT's refusal to budge on rates has drawn criticism, including from Pheu Thai's leader Paetongtarn Shinawatra, who described the central bank's independence as an "obstacle" in May.
The appointment of Kittiratt comes amid concern from economists and four former central bank governors over the government's nomination and its ability to influence the monetary authority. In an open letter, they warned that if successful in getting its candidate as board chair, the ruling party might push for its nominee as governor next year.
Thailand's economy is projected to recover in 2024, supported by sustained private consumption as well as tourism and goods exports recovery. Growth is projected to accelerate from 1.9 percent in 2023 to 2.4 percent in 2024. However, the appointment of a government loyalist as the BOT chair could introduce uncertainty and potential risks to the economic outlook.
In conclusion, the appointment of Kittiratt na Ranong as the new chair of the Bank of Thailand's board raises concerns about political interference and the institution's independence. While the BOT chair cannot directly influence interest rates, the board selects the monetary policy committee and has some influence on the next governor's appointment. Maintaining the central bank's independence and credibility will be crucial to ensure effective monetary policy and long-term economic growth. The government should prioritize transparency and communication to mitigate potential risks and ensure a smooth transition.
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