Dr Prasarn Trairat-vorakul has conceded he faced political pressure on the central bank’s role in taking care of the country’s economic and financial stability three times over the three-and-a-half years he has been the Bank of Thailand governor.
“But, I have never thought of resigning from my post, as this should be the last card I would play – leaving a ‘crux’ [unsolved question] with the politicians to clear up later with the public,” Prasarn revealed to Nation Group chairman Suthichai Yoon in an exclusive interview recently.
Prasarn has held the BOT governor’s post since October 1, 2010, a year prior to the entry of the Yingluck Shinawatra government.
For the past three years Prasarn felt that conferring between politicians and BOT on monetary policy had not been sufficiently “creative”. The officials he compared to a “fullback” in a football team, playing the role of looking after economic and financial stability. On several occasions, however, the ball had been snatched by the team’s “forwards” [the politicians].
First, the government wanted to establish a sovereign wealth fund, focusing on investments abroad – especially in energy, by setting aside money from the country’s foreign reserves which were as high as US$189 billion. This idea was formulated in 2011.
Second, the government wanted to offload its burden of repaying annual interest of Bt60 billion on Bt1.14-trillion debts of the Financial Institutions Develop-ment Fund (FIDF). This was part of borrowings, incurred after the financial crisis of 1997 for restructuring ailing finance institutes, to the BOT. The plan was to leave room for more public debt.
Last, there had been an attempt by those in politics [in the first half of 2012] to force the BOT to lower its policy interest rate to stimulate the economy. At that time, the BOT’s rate stood at 3 per cent.
“I think if we had talked to each other on the above-mentioned issues, first about what the advantages and disadvantages would have been, it could have led to a joint understanding. So far the government has never consulted with the BOT prior to announcing [what it wished] to the media,” he said.
However, the central bank governor said that the economic situation at that time showed that if the BOT had not played its role, especially protecting the foreign reserves, the country may have faced a financial crisis like in 1997.
Prasarn described economic management in football terms.
“If we do not have a strong fullback, we might lose many goals,” he said, adding that no matter how strong the fullback may be, if the forwards were weak with only defensive play, there may be risk of missing a goal.
He insisted the BOT had not gone against the government’s policy, even if in some cases they did not agree. The bank always tried to offer a compromise resolution.
During the long holiday in early 2012, the government stunned the BOT with an executive decree draft on transferring FIDF debt, deciding the government could remove all the BOT’s assets, including land and foreign reserves.
If the decree had been passed by Cabinet it would not have been right, Prasarn said.
He revealed that “At that day in this [guest living] room, the Commerce Minister [now caretaker Finance Minister Kittiratt Na-Ranong] talked with me in a face-to-face meeting, asking me to trust the Cabinet, which was perhaps seen by some as ‘dishonest’.
“I said to [Kittiratt] that with respect to a Cabinet he believed to be honest, that Cabinet would exist for a period of time. But the decree would persist for a long time.” Prasarn said the decree was eventually amended and the change could be attributed to [Kittiratt], who had listened to reason.
Fortunately, Prasarn said, during the time he was governor at the central bank, in his opinion he had never met an “excellent” or “good” person at senior level who had asked him for a favour that made him worry.
“So far, there has been no ‘respectable’ person who has asked me to do something [good or bad for the country], of the kind I used to worry about. So, it was easy making decisions,” he said.
During 2012 when the baht appreciated and caused exports to shrink, Prasarn was politically pressured to quit his post after the BOT kept its policy rate on hold, contradicting requests by the government to amend the rate.
“I knew there were efforts by politicians to dismiss me from the BOT governor’s post. But, what surprised me most was a press conference by the BOT’s board chairman [Virabongsa Ramangkula, now former chairman] at the Government House, asking who would have the power to dismiss the BOT governor.”