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Published on November 21, 2007

The central bank's audit committee has urged political parties not to use its monetary policy as a political tool to lure voters during the election campaign.

A source from the Bank of Thailand (BOT) committee said political parties should realise that any measures introduced by the central bank, especially the 30-per-cent reserve requirement, were not political policies.

"The political parties should have a deep understanding of the measures. They should have reasonable political policies and principles. It is a concern if they link monetary policy with political policy," he said.

The Democrat Party and Matchima Thipataya Party have promised to revoke the reserve requirement if they win the December 23 general election.

The Democrat Party, to which former BOT governor MR Chatu Mongol Sonakul is reportedly an economic adviser, said the revocation would help promote foreign investment, which has been dampened since the measure was introduced.

The source said as the BOT's communication with the public was weak, it was difficult for it to create understanding about its measures.

The BOT committee yesterday evaluated the positive and negative impacts of the measures introduced by the central bank. It also discussed providing information to political parties.

Earlier, the World Bank called on the central bank to relax the reserve requirement to boost foreign confidence. It said the measure had discouraged foreign direct investment (FDI) partly but could not prevent capital inflows in portfolio investment.

For the first eight months of the year, FDI of US$5.4 billion (Bt183 billion) was reported, compared with $10 billion during all of last year. However, portfolio investment of $3 billion was received in the first eight months, higher than $1.6 billion last year.

The BOT source said concerned authorities should weigh the advantages and disadvantages of the measures. The BOT's audit committee has been established to assist and support the board of directors to improve the effectiveness of risk management, control and the governance process within the organisation.

The committee yesterday also discussed rising oil prices and the country's exports and imports.

There have been predictions that the crude oil price could reach $200 per barrel if the US invades Iran and Venezuela.

The BOT also projected that the world's economic slowdown would dampen the Kingdom's exports but the government's investment projects would boost imports. As a result, the country's current-account surplus would be narrowed.

Separately, Ian C Porter, country director of the World Bank Office, Bangkok, said yesterday the bank had already taken into account high oil prices in its latest economic forecast published recently.

He did not think the crude oil price would jump to $200 a barrel in the near future as predicted by the leader of Venezuela, which is one of the members of the Organisation of Petroleum Exporting Countries. However, he said it was very hard to predict oil prices.

Anoma Srisukkasem

 The Nation