Finance minister lets 30% rule stay
Finance Minister Chalongphob Sussangkarn and Bank of Thailand Governor Tarisa Watanagase said yesterday the government had no plans to revoke the 30 per cent withholding requirement on foreign inflows at the moment - in spite of market speculation.
Chalongphob, speaking after their first meeting since he was appointed, said: "The Finance Ministry will not put pressure on the central bank on monetary policy." He insisted the ministry would only provide the central bank with the necessary tools to implement monetary policies without interfering with its decision making. It was earlier speculated that Chalongphob would urge Tarisa to revoke the 30 per cent withholding requirement as he had earlier commented that the measure was too harsh. However, Chalongphob said after the two hour meeting with Tarisa yesterday he believed the monetary and fiscal policies were well co-ordinated at the moment. The 30 per cent withholding requirement and the hedging option will remain effective for the time being to halt speculation on the baht. The baht continued to rise further against the dollar, closing at a new nine-year high of 34.98-35.01 - from Wednesday's 35.00-02. The rise was attributed to the sale of US dollars amid speculation the capital controls would be lifted soon. Asked what measures should be put in place to curb the rise of the baht, Chalongphob said: "We don't know what the best measures will be. We are learning by doing. Countries that are in a similar situation are now closely watching us to see the outcome of our policy implementation." Tarisa said the 30 per cent withholding requirement would remain intact, with the hedging alternative provided to investors effective from yesterday. As of yesterday, the BOT will no longer require investors to deposit 30 per cent of the inflows, not bearing an interest rate, if they are hedged in foreign exchange swaps. She also noted that during the meeting they didn't discuss interest rate cuts, in contrast to earlier reports that Chalongphob had wanted to cut the rates by half a percentage point. Tarisa said the decision on whether to cut the rates would be up to the Monetary Policy Committee (MPC). The source said the Finance Ministry may provide the central bank with support measures for its monetary policies, perhaps by providing more flexibility or allowing it to issue more bonds to absorb the liquidity in the market to ease the pressure on the baht. Wichit Chaitrong The Nation
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