Thai Government Suffers Setback in Bid to Sway Central Bank

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(Bloomberg) — The Thai government’s campaign to pressure the Bank of Thailand to cut interest rates has suffered a major setback, with the State Council Office effectively deciding that the official nominee for bank president, former Finance Minister Kitirat Na Ranong, is unsuitable.

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Without naming Kitirat directly, Secretary-General Pakorn Neelprabunt said in a statement: “Mr.

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While the head of the Bank of Thailand does not participate in monetary policy meetings, he can evaluate the performance of portfolios and also has a say in whether outside experts join the seven-member interest rate committee. The council’s legal opinion means that if the government tries to go ahead with Kitirat’s appointment, it could face political risks and challenges.

It is also possible to start the selection process again.

Kitirat posted earlier this week on Facebook that he “will respect the decision” on whether to become head of the central bank.

Pakorn’s statement did not mention the central bank’s nominees, Colette Sombatsiri, who previously worked in the energy and finance ministries, and academic Surapon Nitikraybut.

Read: Former Thai central bankers vie for non-political chairman post

The government did not immediately comment on Friday’s announcement, which comes just three days after The Thai Post reported, citing the Permanent Secretary for Finance, that the board had decided Kitirat was ineligible. Within hours of the release of this report, Pakorn’s office of the State Council announced that it had not yet reached its legal opinion.

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This highlights the sensitivity of the issue, as Thailand was already late in naming a new party president as opposition mounted against Kitirat, a former member of the ruling Pheu Thai Party. The Economists for Society group, which includes several former central bank governors, warned in November that a president with strong political connections would raise questions about the independence of the Bank of Thailand.

Read: Former Thai central bank chiefs urge PM to reject BOT chief selection

The Thai government has been looking for ways to increase its influence over the central bank, and Bloomberg News reported in June that it was considering using the role of bank president as a way to gain influence.

Read: Thai government looks to tighten grip on central bank after row

The Bank of Thailand cut its benchmark interest rate by a quarter of a percentage point this year, to 2.25%, but at its last meeting it kept borrowing costs unchanged.

The government wants to lower borrowing costs to reduce household debt burden, but BOT policymakers say interest rates are appropriate and other measures are needed to boost growth.

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