Thai minister backs stable baht

Thai minister backs stable baht

BANGKOK (AFP): Thai Finance Minister Amnuay Virawan yesterday
ruled out changes in the country's stable baht-dollar exchange
rate policy, saying economic recovery would depend on fiscal
measures.

The new finance minister, sworn in along with the government
of Prime Minister Chavalit Yongchaiyudh on Sunday, said the
details of his economic policy would be announced on Dec. 11.

The government will continue to support the baht's
fundamentals, Amnuay said. "The fundamentals of the Thai economy
remain strong and the baht continues to perform as a stable
currency should," he said.

Thailand's baht currency has hovered around 25 to the dollar
for more than a decade. The central bank said yesterday the so-
called midrate was 25.56 baht to the dollar.

Amnuay has been seeking to calm fears aroused by central bank
projections of zero export growth in 1996 and revised six-to-
seven percent gross domestic product growth, previously forecast
at 7.8-to-8.0 percent.

"The right and proper way to restore confidence in the baht is
to continue stabilizing the economy, including improving the
current account deficit and trade balance," Amnuay said.

Central bank figures last week said the current account
deficit rose 27.9 percent year-on-year to 300.9 billion baht in
the first nine months of 1996.

The trade deficit was up 27.4 percent to 334.2 billion baht
for the period.

"Tax incentives both for investment and savings will help
boost savings and help the current account deficit," while other
steps are planned to ensure a recovery in export growth next
year, Amnuay said.

The current account deficit was equivalent to 8.1 percent of
the gross domestic product in 1995, but was covered by capital
inflows and a government surplus.

"Any capital-intensive government projects which are seen to
be non-productive will be seriously reconsidered or deferred" in
order to reduce capital spending, Amnuay said.

Finance Ministry permanent secretary Chatumongkol Sonakul
warned last week that the government faced a shortfall in
projected revenue due to the economic slowdown and a possible
deficit if spending was not cut.

Analysts have interpreted the new finance minister's calls for
a reduction in domestic interest rates to boost the economy and a
shift in emphasis towards fiscal policy as signaling a looser
exchange rate policy.

Any significant reduction in domestic interest rates make the
baht less attractive, possibly threatening the country's ability
to service its current account deficit and undermining confidence
in the baht, they said.

Amnuay's announcement appeared to be designed to head off
speculation that authorities would loosen or adjust the basket of
currencies used to set the value of the Thai baht, which is
heavily weighted towards the dollar.