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."