Bank of Thailand Governor MR Pridiyathorn Devakula is entering his sixth year in the country's monetary policy hotseat. Although he has proved his ability to manage policy efficiently, his greatest challenge is to keep the country fiscally stable amid growing pressures from politicians, interest-rate hikes and the rising oil price.

He is now under both economic and political pressure, as the government tries to interfere in the central bank's decision to hike or maintain interest rates.

While central bank senior officials insist their first priority is to maintain stability, caretaker Finance Minister Thanong Bidaya has repeatedly said further interest rate hikes could reduce the country's declining investment levels.

Pridiyathorn was widely known to have enjoyed a close relationship with caretaker Prime Minister Thaksin Shinawatra's group of economic advisers before he came to the office.

Some observers have alleged those close relations were a reason behind Pridiyathorn's appointment to the post.

However, his performance over the past five years has shown his independence from political intervention and his actions have been driven by the demands of the Kingdom rather than any parliamentary party.

His outstanding success was the stabilisation of the baht, which was a familiar concern as he had worked at Kasikornbank and the Export-Import Bank of Thailand (EXIM). Pridiyathorn kept the baht stabile to the benefit of exporters, importers and debtors amid recent fluctuations in global currencies.

In the first few years after he took the position, Pridiyathorn's main task was to accumulate foreign reserves, which are now at their highest point in the country's history.

This allowed the central bank to pay off early the country's crisis bail-out debts under an International Monetary Fund (IMF) programme.

This early redemption can help reduce pressure if the country's current account begins to run a deficit in the next few years, as has been predicted.

In addition, Pridiyathorn took aggressive steps to rein in private consumption by launching stringent measures for credit card and personal loan services despite strong complaints from financial institutions and despite the government's consumption-oriented economic policies.

 His measures have paid off. Once fast-growing consumer loans are under control, which has diluted anxiety over the recurrence of non-performing loans and overly indebted households.

Pridiyathorn's role with interest rates during his first years as governor went unrecognised because the monetary policy tool at that time did not function well due to the massive surplus of liquidity and the likelihood of deflation.

His role was questioned again when the BOT failed to raise the policy rate in the beginning of 2005 as inflation crept up. The BOT's Monetary Policy Committee was accused by some quarters of concentrating too much on economic growth rather than inflation, which is its key priority.

But the inflation rate last year came in under expectations despite negative factors such as bird flu, drought and rising oil prices.

Pridiyathorn's leadership was shaken when the central bank accused the ex-president of Krung Thai Bank, Viroj Nualkhair, who had close ties with the government, of imprudent loan approvals, which resulted in an increase of Bt46-billion in non-performing loans at the bank.

His conflict with the group sparked speculation among politicians that he would be sacked. Thaksin played down the conflict and left Pridiyathorn alone to do his duty.

Despite surviving numerous attempts of government intervention, Pridiyathorn's path in the sixth year seems to be less rosy than it should be.

His task now appears to be tremendously challenging. He must fight the baht's volatility due to an uncertainty over capital movements and high inflationary pressures.

Strengthening the banking system to match international standards remains on his list of tasks to complete.

The central bank now is in a dilemma over whether it will further increase its 14-day repurchase rate at its June 7 meeting to tame inflationary pressures or chose to leave it alone to stimulate the country's economy as the politicians are demanding.

Recently, Pridiyathorn told reporters it was the toughest decision facing the Monetary Policy Committee.

The meeting outcome will give an indication of whether he can follow his role model Puey Ungphakorn, the former BOT governor.

Anoma Srisukkasem

The Nation