Former Thai Finance Minister Korn Warns Against 'Bank Robbery'

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Korn warns against 'bank robbery'

Wichit Chaitrong,

Pimnara Pradubwit

The Nation

Former finance minister says using central bank assets to pay off debts is risky; opposes use of emergency decree

A government plan to issue emergency executive decrees authorising it to unilaterally use reserves to pay off public debts amounts to robbing the central bank, opponents of the scheme said yesterday. They urged lawmakers to drop what they call a risky move.

"The government ad-ministration is creating confusion and damaging public and investor confidence, as only a few ministers make key decisions without consulting other ministers first," said former finance minister Korn Chatikavanij.

Korn pointed to several "vague" Cabinet resolutions, which had been approved only in principle and sent back to government agencies to consider more carefully.

Korn did not reveal any names, but his statement suggested Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong, often made key policy decisions without consulting Cabinet colleagues, in particular Finance Minister Thirachai Phuvanatnaranubala.

The two ministers are believed to have locked horns over the government's latest move requiring the Bank of Thailand to pay off public debts of Bt1.14 trillion owed by the Financial Institutions Development Fund (FIDF). Observers say Kittiratt backs this extreme measure while Thirachai is trying to find a compromise with the central bank.

Kittiratt is expected to propose four emergency executive decrees to the Cabinet tomorrow, requiring the central bank - to pay off debts of Bt1.14 trillion; provide a soft loan of Bt300 billion; allow the government to borrow Bt350 billion; and set up an insurance pool worth Bt50 billion.

The government wants the central bank to pay off this large sum of public debt so it can borrow more to finance new investment projects in post-flood reconstruction.

"The third source of funding is the most risky which should be scrapped, otherwise the Cabinet would irresponsibly take everything from the central bank's assets " said Atavit Suwannapakdee, Democrat MP and member of the House Standing Committee on monetary affairs, finance, banking and financial institutions.

Korn said he did not see the necessity to issue emergency executive decrees for debt payment, but the government should propose the bills before Parliament instead of taking a shortcut.

Korn said government mistreatment of the central bank would lead to ballooning debt instead of public debt reduction as the government planned several populist projects - tax breaks for first-car buyers and free tablets for students.

"The government is going to rob the central bank… Countries that force central banks to print money were labelled as banana republics," said Korn, referring to the poor sovereign credit ratings of countries failing to hold fiscal and monetary discipline.

Korn said he agreed with points like the government seeking help from the central bank and making use of its profits to pay the debts of the FIDF. But Korn said he did not agree with attempts to acquire central bank reserves for debt payment.

"Part of international reserves should be invested in overseas assets and the central bank should make its own decision on such investment," said Korn.

He was responding to the proposal of Virabongsa Ramangkura, chairman of the strategic formulation committee for reconstruction and future development, who said that US$130 billion held as part of the total international reserves of $180 billion, should be utilised for flood-prevention investment. Korn said he did not object if financial institutions were asked to pay more fees to the central bank as they benefited from the market stability that followed the Asian financial crisis of 1997.

"But the government must make sure banks do not pass on the cost to 67 million depositors," Korn said.

Opposition leader Abhisit Vejjajiva said an executive decree to borrow Bt350 billion might breach the Constitution because there was no reason for issuing an emergency decree. He said that it was not an emergency matter to borrow Bt350 billion, since such big investment projects take 3-7 years to implement.

Nor does Abhisit agree with government asking the central bank to provide soft loans of Bt300 billion. He said the government could assign the Government Savings Bank to do that job. "The government chose to ask the central bank because it wanted to shift the interest rate burden incurred from soft loans to the central bank," said Abhisit.

"In the past the governments never forced the central bank to print as much as Bt300 billion for injection into the economy. We'll closely watch how the new amount of money impacts on inflation," he added.

Hunt for funds

Sources of funds the government eyes for debt payment

1 Profits generated from the central bank's activities

2 Assets generated by the annual yields account of the central bank

3 Cash and other asset classes of the central bank, demanded by Cabinet

4 Fees or surcharges collected from financial institutions by the central bank

-- The Nation 2012-01-09

[blackthorn2005]

I saw the headline and thought this might be about scandalously low interest rate i get on my Foreign Deposit Account

[transam]

I saw the headline and thought this might be about scandalously low interest rate i get on my Foreign Deposit Account

I thought it was for the 150bht ATM rip off.

[animatic]

This about the scandalously stupid proposals this cabinet is trying to chronically float, in desperate bids to gin up graft opportunities on top of the much needed repairs to the national infrastructure. Most repair proposals have way to much allocated, and way to little expected to be completed, and they seem bound and determined to bankrupty the country to get more cash to play fast and easy with.

OMG we have no money to play with, how can our backers recover their election expenses! The foxes control the hen house and expect to eat their chickens and still collect the golden eggs into the future. Solly Cholly doesn't work like that.

As to "Fees and charges from banks" to pay for this, that is just taxation by invisible means. Everyone pays for this who ever uses a bank for the next 30 years. Taxation without representation, and no recourse for the little guy.

Edited January 9, 2012 by animatic

[yawg]

As to "Fees and charges from banks" to pay for this, that is just taxation by invisible means. Everyone pays for this who ever uses a bank for the next 30 years. Taxation without representation, and no recourse for the little guy.

The Red Shirts are globalists like Obama. Welcome to the Ponzi scheme of the NWO. Create money out of thin air. After us the deluge ...

[sparebox2]

This about the scandalously stupid proposals this cabinet is trying to chronically float, in desperate bids to gin up graft opportunities on top of the much needed repairs to the national infrastructure. Most repair proposals have way to much allocated, and way to little expected to be completed, and they seem bound and determined to bankrupty the country to get more cash to play fast and easy with.

OMG we have no money to play with, how can our backers recover their election expenses! The foxes control the hen house and expect to eat their chickens and still collect the golden eggs into the future. Solly Cholly doesn't work like that.

As to "Fees and charges from banks" to pay for this, that is just taxation by invisible means. Everyone pays for this who ever uses a bank for the next 30 years. Taxation without representation, and no recourse for the little guy.

Thaksin (or his proxy) govt always come out with stupid ideas that no one thing it will work in Thailand. 30 baht health, OTOP, a million for each hamlet, etc. BUT it eventually became a vote winner.

[bkk_mike]

I would think all foreigners with offshore income would welcome this move...

Forcing a central bank to print money against it's will while increasing a budget deficit is hopefuly a good way to devalue the currency...

60 baht to the pound again anyone? (at least if the UK stopped doing the same... QE3...)

[pimay11]

This about the scandalously stupid proposals this cabinet is trying to chronically float, in desperate bids to gin up graft opportunities on top of the much needed repairs to the national infrastructure. Most repair proposals have way to much allocated, and way to little expected to be completed, and they seem bound and determined to bankrupty the country to get more cash to play fast and easy with.

OMG we have no money to play with, how can our backers recover their election expenses! The foxes control the hen house and expect to eat their chickens and still collect the golden eggs into the future. Solly Cholly doesn't work like that.

As to "Fees and charges from banks" to pay for this, that is just taxation by invisible means. Everyone pays for this who ever uses a bank for the next 30 years. Taxation without representation, and no recourse for the little guy.

Thaksin (or his proxy) govt always come out with stupid ideas that no one thing it will work in Thailand. 30 baht health, OTOP, a million for each hamlet, etc. BUT it eventually became a vote winner.

You hit the nail directly on the head. But it eventually becomes a vote winner.

[Kaysom]

90 Baht to the Pound !!! Oh yes indeed. I remember those heady days. I also remember what precipitated 90 Baht to the Pound as well. This little wheeze reminds me very much of the shennanigans that went on in 1995/96.And we all know what that lead to.

[IsaanUSA]

OK 60-90 baht to the pound, but you guys are forgetting about inflation. If the prices rise at the same rate of the currency falling, then the net gain would be null. They probably would rise/fall at the same rate, but if consumer items continue to rise in price then the citizens will get even more upset. Then you'll be living in hostile territory.

In reality, if the currency did fall (crash) then exports would be cheaper, employment in low paying factory jobs should be up and the rich would probably get richer.

[davejonesbkk]

would it be possible for the rate of baht devaluation to be faster than inflation though? Tbh Ive noticed that a lot of prices have gone up noticeably in the last 2 years or so already.....

[TAWP]

As to "Fees and charges from banks" to pay for this, that is just taxation by invisible means. Everyone pays for this who ever uses a bank for the next 30 years. Taxation without representation, and no recourse for the little guy.

The Red Shirts are globalists like Obama. Welcome to the Ponzi scheme of the NWO. Create money out of thin air. After us the deluge ...

Red Shirts isn't - but their paymaster Thaksin is.

But not the good kind of Globalist, open boarders for all, no trade-barriers that make it harder for poorer countries to sell clothes to Europe etc - but the bad kind that want a few multinational companies - with people part of the 'club' - carving up the benefits of slanted trade-agreements and non-free market places.

[ajarnmark]

This about the scandalously stupid proposals this cabinet is trying to chronically float, in desperate bids to gin up graft opportunities on top of the much needed repairs to the national infrastructure. Most repair proposals have way to much allocated, and way to little expected to be completed, and they seem bound and determined to bankrupty the country to get more cash to play fast and easy with.

OMG we have no money to play with, how can our backers recover their election expenses! The foxes control the hen house and expect to eat their chickens and still collect the golden eggs into the future. Solly Cholly doesn't work like that.

As to "Fees and charges from banks" to pay for this, that is just taxation by invisible means. Everyone pays for this who ever uses a bank for the next 30 years. Taxation without representation, and no recourse for the little guy.

Thaksin (or his proxy) govt always come out with stupid ideas that no one thing it will work in Thailand. 30 baht health, OTOP, a million for each hamlet, etc. BUT it eventually became a vote winner.

You hit the nail directly on the head. But it eventually becomes a vote winner.

No he did not... it is just a non sense comment from someone who does not even know the basics of economics... Public debts have to be paid and there has to be some way to pay that... either by printing more money or using bank reserves... either way the end result is the same...

Much easier to be a keyboard warrior than to learn a technical subject matter...