BANGKOK, Sept 20 (Askume) – Thailand’s central bank governor stressed the need to maintain independence in setting monetary policy on Friday, amid a long-standing disagreement with the government over whether interest rates should be cut to support the economy.
Low interest rates could boost short-term growth, but also curb inflation and lead to vulnerabilities such as debt accumulation and speculation, Bank of Thailand (BOT) Governor Sethaput Suthiwartanaruput said at a seminar.
These risks would hinder long-term growth and could lead to a crisis, he said, adding that the independence of the central bank is crucial for price stability.
His comments come amid a long standoff between the government and the central bank , with the government repeatedly demanding rate cuts to boost fiscal stimulus , while the central bank says rates are appropriate but structural problems are holding back economic growth.
Thailand’s key interest rate has been at a more than a decade high of 2.50% for more than a year as the Bank of Thailand has resisted repeated calls for a rate cut. The next rate review is on October 16.
Earlier this year, before he became prime minister , Thai Prime Minister Patongtarn Shinawatra said the central bank’s independence was an obstacle to solving economic problems .
The government will launch its signature 450 billion baht ($13.6 billion) “digital wallet” program later this month , under which 145 billion baht will be distributed to vulnerable groups. The stimulus package provides 10,000 baht to each of 50 million Thai people for consumption in local communities.
The plan has been criticised by economists, including two former central bankers, as fiscally irresponsible.
The government has rejected the claim but is trying to find funding. The central bank said the policy is needed to stimulate economic vitality, and it expects economic growth to be just 2.6% this year , rising to 1.9% in 2023.
The government plans to nominate former finance minister Kittirat Na Ranong, a staunch critic of the BOT, as the next BOT board chairman, sources told Askume .
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