Kittiratt Cites Rift With Bank of Thailand Chief as Baht Rises

Thailand’s finance minister complained of a lack of communication with the central bank chief stemming from their opposing economic views, a reflection of tensions over whether lower interest rates are needed.

“We have different economic opinions -- we need to understand each other,” Kittiratt Na-Ranong told reporters in Bangkok today, after saying late yesterday that he had to send a letter to the Bank of Thailand’s chairman in February because he couldn’t talk with Governor Prasarn Trairatvorakul.

The finance minister said at an event yesterday that he had “thought” about removing Prasarn, while he added today that “I have many thoughts and finally they are just thoughts.” Prasarn has held off on cutting rates in four meetings even as a 7 percent jump in the nation’s currency threatened to curb Thai export competitiveness.

Thailand is attracting funds because investors are confident about the economy’s strength and it doesn’t face the uncertainty tied to impending elections in Malaysia or a large current-account deficit like Indonesia, Prasarn said last month. Kittiratt said today that the country should be “careful” of speculative inflows into the local bond market.

“Such a gap between the government and the central bank happens in some other countries,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Whether he can really fire the governor is a separate issue because of the independence of the central bank. That’s probably why the market has stayed calm.”

Baht Rally

The baht has surged 6.6 percent against the dollar this year, reaching the strongest level since the currency’s devaluation in July 1997 sparked the Asian financial crisis. The currency was little changed at 28.69 per dollar as of 1:43 p.m. in Bangkok from late yesterday in New York, according to data compiled by Bloomberg.

Global funds bought $1.7 billion more Thai government debt than they sold this month, taking this year’s net purchases to $12 billion, Thai Bond Market Association data show. They sold a net $486 million of Thai equities this month and $362 million this year, according to exchange data.

In a debate late yesterday with Korn Chatikavanij, deputy leader of the opposition Democrat party, Kittiratt was asked whether he’d considered removing Prasarn.

“Yes, but it’s just a thought,” Kittiratt said. “This is the first time I said I have thought about it.” When asked under what circumstances he may push to have the governor replaced, Kittiratt said “pass,” and declined to answer further questions on the topic.

Growth Forecast

Prasarn was unavailable for comment on Kittiratt’s remarks when called at his office in Bangkok today. He was appointed to a five-year term as governor in 2010.

Under Thai law, a central bank governor can only be removed by the Cabinet on the recommendation of the finance minister or the Bank of Thailand’s board as a result of misconduct or gross incompetence.

The central bank’s monetary policy committee voted five-to-one to keep the one-day bond repurchase rate unchanged at 2.75 percent on April 3. A week later, the bank raised its forecast for economic growth this year to 5.1 percent from 4.9 percent.

Both Kittiratt and Prasarn have ruled out imposing capital controls to stem baht gains.

“When we have a difference of opinion, I need to try to convince him to think like me,” Kittiratt said today. “Harmony in managing the economy is important. We don’t have a problem in our relationship. We just have different views.”

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