However, the appreciation of the baht has enabled the Public Debt Management Office to repay foreign debt ahead of schedule and save the country interest costs.

Chalongphob said the economy had been slowed down by a number of factors, including national politics and the structure of industries.

The Asian Development Bank yesterday projected growth in the gross domestic product would be 4 per cent this year, well below the potential of 6-7 per cent.

Chalongphob said economic reform and human and technology development would take time and that a new government would have to carry it further.

Consumer and investor confidence has been hit hard by a series of political mishaps and the unclear direction in macroeconomic policies since the September 19 coup. One of the negative factors has been the capital-control measure imposed by the central bank, a 30-per-cent withholding of capital inflows.

Chalongphob and Bank of Thailand Governor Tarisa Watanagase yesterday insisted the capital control would stay in place, as would the fully hedged option.

Tarisa said the capital-control measure would be revoked when the time was right. "If we find that a fully-hedged measure is effective in deterring baht speculation, the 30-per-cent withholding requirement will be cancelled," she said.

Meanwhile, the Public Debt Management Office yesterday released a report that it had refinanced debt worth US$1.33

billion (Bt46.58 billion) at the end of the second quarter of fiscal 2007, saving Bt810 million in interest payments.

The appreciation of the baht against the US dollar enabled the office to swap debt to baht and could reduce foreign debt from $5 billion at the beginning of the fiscal year to $4.3 billion. Much of the foreign debt was signed when US$1 cost Bt38, while now the dollar has fallen to about Bt35.

However, state enterprises have failed to take advantage of the strong baht, resulting in slow progress in their debt management. State enterprises experienced a change of boards and executives following the coup.

In a related development, Chalongphob and Tarisa met the secretary-general of the Anti-Money Laundering Office yesterday to discuss the new practice of campaigning against organised crime. Shop-owners or traders will be required to report to the office if they suspect their clients are engaged in criminal activity. Wrongdoers often buy goods with cash, while general consumers use credit, so shop-owners must now report if a customer pays cash

for purchases of Bt2 million or more.

One bank dealer said the baht rose in the morning session yesterday, because exporters sold the greenback, but he did not know whether the sell-off was part of the adjustment in the net foreign-exchange position.

However, the baht weakened in the afternoon session, and after opening at 34.98/34.90 to the dollar, it closed at 34.96.

Wichit Chaitrong

The Nation