Chavalit defends baht amid warnings of fresh assault
Chavalit defends baht amid warnings of fresh assault
BANGKOK (AFP): Thai Prime Minister Chaowalit Yongchaiyudh has
committed himself to defending the baht amid warnings that the
currency could come under fresh speculative attack.
Summing up his first six months in office, Chaowalit said in a
live television appearance Sunday night that the national
currency could never be devalued.
"To devalue is easy, but it could cause bad damage and affect
all Thais," the premier said.
But the vice-chairman of the independent Thailand Development
Research Institute (TDRI), Nipon Puapongsathorn, called at an
opposition party seminar Sunday for a 15 percent devaluation to
help reduce the current account deficit.
Siam Commercial Bank president Olarn Chaipravat meanwhile
warned of a fresh attack on the baht by currency speculators in
August when three- and six-month forward contracts close.
In mid-May, speculators launched an all-out assault on the
Thai currency in a bid to force a devaluation as Thailand reeled
from an economic downturn with stagnant exports and a sickly
stock market.
The central bank combined with others in the region to defend
the baht which remained stable until the June 20 resignation of
Finance Minister Amnuay Virawan, which triggered renewed concerns
about economy and finance sectors, caused it to dip.
"The government should have devalued the baht when it took
office. ... It might not be too late to devalue now -- by 15
percent," the Bangkok Post quoted Nipon as saying.
If the government refused to devalue, the currency risked
plummeting unexpectedly, he held.
The value of the baht was unrealistically high while the
current account deficit was at eight percent of Gross Domestic
Product (GDP), indicating a higher level of investment than of
savings domestically, he remarked.
Opponents of a devaluation say it would prolong the recession
by increasing burdens on private companies holding high levels of
foreign currency loans.
Finance companies
Meanwhile, Thai Finance Minister Thanong Bidaya said
yesterday that 75 finance companies were financially sound and
there would be no need to suspend more firms from operating.
On Friday, the authorities suspended the operations of 16 Thai
finance companies and ordered them to merge or arrange mergers
with stronger entities within 30 days.
Thanong was addressing a media conference which he said had
been called to calm public concerns about deposits held by the
finance houses.
All deposits held by finance companies would be guaranteed by
the government, although this will be implemented on a case-by-
case basis, he said.
Thanong said finance company depositors would also be able to
move their deposits into commercial banks and they would be
allowed to convert promissory notes to certificates of deposits
accordingly.
Bank of Thailand Governor Rerngchai Marakanonda told the news
conference that as of yesterday the central bank had capped bank
deposit rates at 12 percent and finance company deposit rates at
14 percent.
He said the call loan rate for the 75 sound finance companies
had been fixed at 11 percent.
Financial institutions have been caught by a combination of an
economic slowdown, a property glut and high interest rates that
have pushed bad debt levels as high as 800 to 900 billion baht
(31 to 35 billion dollars).
Thanong said the authorities would continue to inject
liquidity into the financial system, reiterating that all finance
company deposit holders "will be taken care of and need not worry
about their deposits."