The Bank of Thailand (BOT) plans to revoke some minor and "unnecessary" anti-speculation measures introduced last year but insists - at present - on maintaining its draconian 30-per-cent withholding measure without change.

BOT Governor Tarisa Watanagase said yesterday that among the measures the central bank might revoke is a requirement that financial institutions that borrow baht from non-residents without underlying transactions must hold their positions for at least six months.

"We'll soon call off some unnecessary rules in order to help relevant parties, but we insist on maintaining the reserve requirement unchanged," she said.

The bank also intends to retain such measures as one that bars local institutions from participating in sell and buy-back transactions in local bonds with non-residents, and it will not revise the current withholding requirement for property funds and mutual funds, said Tarisa.

In its bid to stabilise the baht, the BOT also insists on maintaining the reserve requirement of 30 per cent for foreign loans to businesses in Thailand and for non-residents' investments in debt instruments.

From yesterday, non-residents wanting to invest in Thai equities are officially required to open a new account, called a special non-resident baht account for securities (SNS), with a balance limited to Bt300 at the end of the day. The outstanding amount of a non-resident's general account is also curbed at Bt300 at the end of the day.

Commercial banks are required to report their number of SNS accounts to the BOT each Friday and later inform the central bank of the amount of outstanding money in the accounts.

Since the withholding measure was introduced on December 19, the baht has been stable, thanks to small capital inflows over the holiday season.

The baht opened at 35.97 to the US dollar yesterday, unchanged from last Friday, but it appreciated 0.65 per cent against the euro and 0.14 per cent against the yen.

Tarisa said the bank would  assess the results of its heavy-handed measures by mid-month, when the market has returned to normal after the holiday.

Last year, the baht appreciated 17 per cent, compared with a 7-8 per cent appreciation against other regional currencies. Huge amounts of capital flowed into the country. There was intense speculation in the currency, because the baht was seen as a proxy Asian currency.

The central bank governor said she would keep the baht's movement in line with that of other regional currencies. Thailand's estimated current-account deficit, which may be as high as US$3.2 billion to $6.2 billion (Bt114 billion to Bt222 billion) this year, will also help calm the appreciating baht.

Tarisa said the BOT had not intervened in the currency market since its withholding measure was launched. International reserves increased by $2.8 billion to $67 billion at the end of last year, as a result of the central bank unwinding its position on sell-buy swap deals.

Anoma Srisukkasem

The Nation