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Showdown looms for BOT post

Vatchara Charoonsantikul

Achara Deboonme

The Nation

Chatu Mongol

Government seeks to install Virabongsa as chairman, but bank backs Chatu Mongol

BANGKOK: -- The government and monetary authorities are gearing up for another showdown, this time over whether MR Chatu Mongol Sonakul will stay on as chairman at the Bank of Thailand or be replaced by former deputy prime minister Virabongsa Ramangkura.

A source in the financial industry told The Nation that while Chatu Mongol was fighting to stay on, Virabongsa had won strong support from Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong. If Virabongsa wins, a possible further easing of monetary policy amid high inflation, as well as government use of the country's huge foreign reserves - which stood at US$178.6 billion (Bt5.51 trillion) as of April 13 - are both possibilities.

"Through its nomination, the government is interfering in the central bank's operations. Though the Cabinet's endorsement is necessary, the BOT has historically been left to nominate its chairman," the source said on condition of anonymity.

Three members of the Court of Directors will complete their terms at the end of this month, including Chatu Mongol. The nomination must be made by April 25, while the outgoing directors can retain seats for 120 days until the selection process is completed.

According to the source, while nominating Virabongsa as chairman, Kittiratt proposed as directors Pansak Winyarat, a close aide of former prime minister Thaksin Shinawatra; and Kanit Sangsubhan, director of the Fiscal Policy Research Institute Foundation, whose term there will end this month. On the Bank of Thailand's list, Chatu Mongol was nominated as chairman.

It remains unconfirmed whether economic guru Narongchai Akrasanee would be nominated as a director. The selection process is expected to be completed early next month.

Chatu Mongol and Virabongsa were born in the same year, 1943. Should he win, Chatu Mongol can serve as BOT chairman for 18 months. It would be 16 months in Virabongsa's case, as the BOT law mandates that the chairman must not be aged over 70 years.

"It's well known that they are of different schools of thought. It is clear that Chatu Mongol is on the nomination list because the BOT wants to preserve its independence from political interference," the source said.

According to the source, Kittiratt has the upper hand given that, of the seven members of the selection committee, six were recently appointed and all represent the Finance Ministry. They include former Finance permanent secretary Suparut Kawatkul and former Revenue Department director-general Sirote Sawasdipanich.

Panus Simasathien, former chairman of the National Economic and Social Development Board, is the only survivor of the recent changes and still chairs the committee.

The source was fearful that if Virabongsa wins, he could introduce big changes in monetary policy, which has been a thorny issue between the government and the nation's most-respected economic institution.

On different occasions, Kittiratt has expressed his wish for a lower interest rate to spur the economy. Once, he proposed a cut of 1-2 percentage points in the policy rate, which is now at 3 per cent. The Bank of Thailand's Monetary Policy Committee (MPC) next convenes on May 2.

Caught between increasing inflationary pressure and the huge economic damage from last year's floods, the MPC at its previous meeting decided to maintain the rate, saying the current level could accommodate economic recovery and maintain economic stability.

The International Monetary Fund's mission to Thailand revealed recently that fiscal and monetary policies for now are supporting growth without creating inflationary pressure. In short, should spending measures increase while the policy rate declines, this scenario would be dramatically different.

On fiscal spending, according to Prime Minister Yingluck Shinawatra's address to the Foreign Correspondents' Club of Thailand in March, the government plans to invest $11.4 billion in water-management schemes and more than $70 billion on infrastructure over the next five years.

To finance this, the government won its fight to transfer the Financial Institutions Development Fund's Bt1.14-trillion debt obligation from the Finance Ministry to the BOT. The government consequently saw an immediate drop in its ratio of debt service to gross domestic product, based on the annual interest payment of about Bt60 billion. However, this has led to criticisms over a possible monetary-policy bias, as the BOT will need to take into account the debt obligation, aside from financial stability.

Since being appointed chairman of the government's Strategic Committee for Reconstruction, Virabongsa has been adamant that Thailand is capable of financing infrastructure investment. He openly expressed his wish that the government get its hands into the foreign reserves.

According to the source, if Chatu Mongol loses the race, the fight for independence would fall to the BOT's governor, Prasarn Trairatvorakul. He fought hard - but in vain - against the orders to assume the FIDF's debt obligation and the launch of a Bt300-billion soft-loan scheme. More failures may cost him his title - and more important, the country's long-term economic stability.

-- The Nation 2012-04-21

[Honkytowner]

If the photo supplied is accurate, it appears that Chatu Mongol has a rather defective clone.

[anterian]

If the photo supplied is accurate, it appears that Chatu Mongol has a rather defective clone.

Nah, one is practicing standing on a soap box.