Finance Minister Chalongphob Sussangkarn's surprise move to take back the power to hire and fire the Bank of Thailand (BOT) governor has turned back the clock on Thailand's fiscal and monetary management system. Such a move will once again make it possible for politicians to assert undue influence in ways that might lead to economic instability.

The Finance Ministry and central bank often have opposite objectives. The government - elected or otherwise - always tries its best to promote economic growth in the short-term in order to boost its popularity. The central bank, on the other hand, has the duty to ensure monetary stability, as reflected in a satisfactory inflation target and stable exchange rate, among other things. Its sanctified mission is to ensure economic stability and the sustainability of growth over the long term.

Normally, the central bank uses interest rates as a tool to prevent uncontrollable price increases and to trim inflation or cool down an overheated economy.

The BOT was made a scapegoat in the 1997 financial crisis for its failure to defend the value of the baht against speculators. That was despite the fact that political interference was also identified as a major cause contributing to the central bank's policy mismanagement, which led to very dire consequences.

Former Bank of Thailand governor MR Chatu Mongkol Sonakul initiated the idea to amend the BOT Act to ensure that the central bank could operate relatively free from political interference. The idea was also adopted by his successor, MR Pridiyathorn Devakula, who later became finance minister following the coup, but resigned earlier this year.

Under the draft amendment scrapped by Chalongphob, the central bank governor would have been appointed or sacked by a selection committee charged with ensuring that the process is transparent and free from political meddling.

Chalongphob's decision this week to go back to the same old system - which is prone to interference because it gives politicians the authority to appoint and dismiss the governor - is disappointing and ill judged. Putting the central bank governor under the thumb of politicians will prevent the BOT from performing its job the way it should - without fear or favour.

What if politicians feel the interest rate set by the central bank has not been lowered to their liking in order to boost the economic growth? Should they be allowed to appoint anyone who is willing to follow their agenda as the central bank governor at the expense of monetary stability, or to dismiss a governor who insists on doing his or her job independent of the government's control?

These are the questions that will arise and they pose a major risk to the monetary stability and sustainability of the country's economic growth.

The current BOT Act contains a safeguard that says the finance minister's decision to sack the governor must be based on reasonable grounds, for example, when the governor's performance is not up to par. But the letter of the law does not guarantee fairness in practice because performance assessment by a politician can be subjective.

In the past, central bank governors have been sacked, in most cases, because they ran into conflict with politicians, regardless of whether or not those governors were successful in implementing responsible monetary policy.

For instance, it was widely known that MR Chatu Mongkol was sacked by former prime minister Thaksin Shinawatra because he refused to yield to the government's demands concerning the interest rate.

Given the growing volatility of the global economy and the ravages of international capital flow, central bank governors around the world should enjoy more independence - not less - to protect their monetary and financial systems, which are becoming increasingly vulnerable to international impact.

The Finance Ministry reasoned that the minister should appoint the central bank governor to ensure that the governor would be accountable to the public. However, the central bank governor can be made accountable through other means such as the requirement for the governor's appointment to be confirmed by Parliament or making him or her answerable to scrutiny and questions from the people's representatives, similar to the US model.

The Finance Ministry must reconsider this wrong-headed decision.