Reversal of policy over BOT chief
Chalongphob wants to retain the power to hire and fire governor
Finance Minister Chalongphob Sussangkarn plans to reverse his predecessor MR Pridiyathorn Devakula's plan to transfer the finance minister's power to appoint and sack the Bank of Thailand (BOT) governor to a central committee.
His adviser Somchai Jitsuchon explained that the minister had to be accountable to voters.
Among other reversals of policy, Chalongphob will review draft bills related to the financial sector approved by Pridiyathorn.
Pridiyathorn, himself a former BOT governor, wanted to give the governor more indepen-
dence from the ministry and politicians in general as part of the amendment of the Bank of Thailand Act.
He and the central bank itself believed that it would better supervise the banking sector and monetary policy if free from political intervention.
According to Pridiyathorn's proposal, approved by the Cabi-net, the governor would have a
five year-term, renewable only once.
Several ministers have sacked governors over differences of opinion.
Intervention was evident when governor Rerngchai Maraka-nond's attempt to float the baht before July 2, 1997 to curb the central bank's losses was delayed until it had incurred exorbitant losses from currency intervention.
Pridiyathorn's predecessor MR Chatu Mongol Sonakul - sacked over a disagreement about central-bank accounting methods - also contemplated the formation of such a committee.
Chalongphob, while insisting that there were limits to carrying out fiscal policy in a climate of economic slowdown, previously sent a signal to the central bank to further cut the policy rate to boost growth, at the same time protesting that he did not want to intervene.
Pairoj Vongvipanond, an economist at Dhurakij Pundit University, said he was surprised that Chalongphob disagreed with Pridiyathorn.
"We should have tried what Pridiyathorn proposed. Central bankers in other countries tend to enjoy more independence from politicians."
Pairoj said the ministry might introduce additional legislation to enable the governor to make some critical decisions without the blessing of the ministry.
But he said the BOT should nonetheless be accountable to Parliament as in the American
system, where the chairman of the Federal Reserve is hand-picked by the president but obliged to testify to Congress on monetary policy.