Published: 23 Apr 2013 at 16.46Online news: News
Prime Minister Yingluck Shinawatra on Tuesday expressed concern over the Thai currency's continuing appreciation amid predictions it could strengthen to around 27 baht to the US dollar.
She had also directed economic ministers, particularly Finance Minister Kittiratt Na-Ranong, to come up with proper measures to ease the difficulties the foreign exchange rate was causing manufacturers.
So far Mr. Kittirat came up with one solution: ‘Fire Bank of Thailand governor Prasarn Trairatvorakul.’ He is very clever, in deed to add one more crisis on top of the existing crisis.
Asked whether the government would intervene to prevent the baht from getting stronger, Ms Yingluck said reporters should direct their questions at the central bank, which is duty bound to oversee the baht's value.
Again like the Finance Minister like the boss, both like the blame game.
Responsibilities of BoT, according to the Bank of Thailand (BOT) Act B.E.2485 as amended by B.E.2551:
1. Print and issue banknotes and other security documents
2. Promote monetary stability and formulate monetary policies.
3. Manage the BOT’s assets
4. Provide banking facilities to the government and act as the registrar for the government bonds
5. Provide banking facilities for the financial institutions.
6. Establish or Support the establishment of payment system
7. Supervise and examine the financial institutions
8. Manage the country’s foreign exchange rate under the foreign exchange system and manage assets in the currency reserve according to the Currency Act.
9. Control the foreign exchange according to the exchange control act.
There is nothing says that BoT has to oversee the value of the baht, the only thing BoT to control the foreign exchange according to the exchange control act which is impossible right now due the reasons I will explain below.
Responsibilities of Minister of Finance
As currently defined in The Public Administration Act, the Ministry is empowered to oversee various matters concerning public finance, taxation, treasury, Government property, operations of Government monopolies, revenue- generating enterprises which can be legally operated only by the Government and not under the purview of other Government bodies, as well as other organizations to which the Government has contractual obligations. It is also vested with the power to provide loan guarantees for the Government agencies, financial institutions, and state enterprises.
The currency rate increases when the demand for it is greater than the available supply. It will become less valuable whenever demand is less than available supply .In Thailand, the baht that is available in the market is less than the demand. Can BoT control the demand and supply of the baht in the world market, especially in the speculative market? Can BoT control the foreign exchange rate such as Forex which also fluctuates on the demand and supply?
Here it says that Minister of Finance has to oversee the public finance.
What is the cause of increase in valuation of money
Increased demand for a currency is due to either an increased transaction demand for money, or an increased speculative demand for money.
The former demand for money is highly correlated to the country's level of business activity, gross domestic product (GDP), and employment levels. BoT will have little difficulty adjusting the available money supply to accommodate changes in the demand for money due to business transactions.
But if the demand for money is not from the usual business and exceptionally high such as Government’s three mega schemes: rice pledging scheme, flood rehabilitation and prevention and infrastructure schemes that has required loans worth more than 4 trillion baht, that is more than the total budget of this year by one trillion plus+, how can BoT handles the government’s spending ?Only the government can fix her own spending because of these schemes are not the nitty gritty things that the government must do, well, for example, the express train for the outlying provinces!
The speculative demand for money is much harder for a central bank to accommodate but they try to do this by adjusting interest rates. BoT can lower the exchange rate say from 2..,75 to 2.5%, but that is only .25%, no match to the gain of 30-28=2, 2/30X100= 6.6% within 3 months or a gain of 26.4% for the year. There is no stop now, unless the government stops borrowing and lives within the means, then the speculation that there will be more shortage resulting in higher value of baht will stop.
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