BANGKOK, Feb 14 – The Bank of Thailand (BoT) gave assurances today that it is capable of managing its Bt530 billion budget deficit without having to touch the national coffers.
BoT Governor Prasarn Trairatvorakul emphasised the central bank’s role in maintaining the country’s economic and financial stability, saying that any evaluation of the BoT’s performance is based on the nation’s economic stability rather than on profit-making.
He said the accumulated Bt530 billion deficit was due to the central bank’s interventions in the appreciating Thai currency and losses from the 2 per cent interest margin.
Such losses can be managed by the BoT without having to disturb money from the public’s taxes, he said.
Regarding conflicts with the Finance Ministry on policies about inflows of foreign capital, Mr Prasarn said that different opinions are normal in every country and it is constructive as it leads to an understanding of all negative impacts.
Both the Finance Ministry and BoT are concerned with the capital movement which can lead to a financial bubble if it is excessive, he said.
Mr Prasarn pointed out that low interest rate may lead to a bubble phenomenon in the real estate sector and the stock market due to profit speculations while high interest rates may trigger profit speculations in the bond market.
“We have to make a balance, and the interest rate is not the only element that stimulates an inflow of overseas capital,” the BoT governor said. “Investors take several elements into consideration. In Thailand, sentiment is the most crucial risk factor for investment.”
He gave reassurances that the central bank is equipped with several levels of financial mechanism to stabilise the nation’s financial system.