The unstoppable baht could put Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula in the hot seat.

The baht has risen by 15 per cent against the US dollar since the beginning of the year, to a critical point of around Bt35 to the dollar, a record high in nine years since the Asian economic crash.

The rising currency has prompted speculation that the government would recruit another economic minister to take care of the issue.

"I have not heard about it," was the comment from Pridiyathorn, who dismissed the gossip last week when asked about reports of a new economic minister to join his team.

Pridiyathorn assured that the overall economy was in good shape. However, he conceded that the only problem was the appreciation of the baht and the difficulty this causes for exporters, even though he earlier insisted that the baht's rise was not a worry.

Prime Minister Surayud Chulanont also dismissed a rumour that economic ministers would be reshuffled, but people paid special attention to the supposed new minister: noted economist Virabongsa Ramangkura.

Virabongsa's name popped up as debate intensified about the stronger baht. Virabongsa has long made known he favours a weak baht. He holds the view that Thailand needs a weak baht so exports can remain competitive. He has also made clear that a weak baht would boost domestic demand as exporters earn dollars that are exchanged for more baht.

And if the baht is weak, exporters can earn more baht from every dollar sold. This results in more money being injected into the local economy. The positive impact also trickles down to farmers, who sell rice and other farm products that are later exported to the world's markets.

Virabongsa has argued that almost every country in the world prefers a relatively weak exchange rate.

He often attacked Pridiyathorn when the latter was governor of the central bank, during which time monetary stability was promoted - in spite of calls for rate cuts to promote growth.

New Bank of Thailand Governor Tarisa Watanagase has followed the same guideline laid down by Pridiyathorn. With the latest rise in the baht and regional currencies, she said the impact of the stronger baht was less important than the economic growth of Thailand's trading partners - if people in importing countries had more income they would buy more Thai exports, so the exchange rate would play a lesser role.

Looking back to the 1997 financial crisis, the difference in mood between now and then is stark. When the baht fell from about Bt27 to the dollar to more than Bt40, months after International Monetary Fund (IMF) forced Thailand to abandon a fixed exchange mechanism and adopt a managed float regime, many people had no idea it could plunge to Bt35 per dollar, let alone Bt40.

Yet, later, there was almost a consensus that having a weaker baht nearer to Bt40 to the dollar played a major role in our post-crisis economic recovery.

Familiar with a weaker baht, people find it hard to believe that the currency could strengthen to Bt35 to the dollar. Another intriguing aspect is the involvement of money speculators. Many have blamed fund managers for killing the baht and sparking a crisis.

Lately, Narongchai Akrasanee, executive chairman of the Export-Import Bank of Thailand, warned that money speculators were behind the strengthening of the baht.

"Money speculators can make profits from both a weak and strong baht," he warned, upset that the central bank's measures have not been able to curb the rising currency.

The World Bank has not been worried about Asian currencies rising in value against the US dollar. It says that in the long run capital inflows will bring in new technology and management, which is important for long-term growth. The World Bank also suggested

that strong currencies could be offset by increasing productivity.

The debate on exchange rates could go on forever, but in Thailand those opposed to a weak baht may have the louder voices. Supporters for a weaker baht hope that Virabongsa might step in. Indeed, their hopes are not groundless, as Virabongsa has a good relationship with elite figures behind this administration.

Pridiyathorn was recently singled out as a political target in his plan to legalise the interim government's policy on the two- and three-digit lotteries. Meanwhile, his relationship with Auditor General Khunying Jaravan Maintaka is less than friendly.

Exporters and industrialists have voiced growing concerns over the adverse impact from the rising baht eroding the competitiveness of their products. Commerce Minister Krirk-krai Jirapaet yesterday admitted the rising baht would make it almost impossible to achieve 12 per cent growth in exports next year.

The challenge any government faces is decelerating growth. The military-installed government may find it hard to appease the public if the economic growth rate is adversely hit by the appreciation of the baht.

If Pridiyathorn does nothing, or the central bank does not take effective action against the rising baht, there is a high chance that the interim government's economic team could be reshuffled.

Wichit Chaitrong

The Nation