ASEAN KEY DESTINATIONS
Thai bank head slams loans
BoT governor Prasarn Trairatvorakul said doing so would breach monetary discipline and set a poor precedent for the government to borrow from the central bank in the future.
He said the government should consider clearing the principal of the liabilities with fiscal money, rather than utilising the central bank's funds.
"We need to consider the proposal carefully. If any future governments overspend and sink into problems, and they don't want to increase taxes and cannot borrow from the market, they might turn to the central bank again if we allow this proposal," said Dr. Prasarn.
"Worse, the loan is interest-free. The burden rests with the central bank." The Finance Ministry's proposal is different from the US Federal Reserve's action, as the US central bank bought bonds from the secondary market, not directly from the government. In addition, the bonds are not interest rate-free, he said.
"Most countries resolved cost incurred from the financial crisis by going to Parliament and asking for funds," Dr Prasarn said. "We need to try to find a resolution [to the Financial Institutions Development Fund's liabilities]. But countries that used the fiscal budget to resolve bailout costs rather than using an indirect approach will incur even more costs."
The proposal for the central bank to buy the ministry's zero-coupon bonds was among the latest attempts to resolve the FIDF's debt that stands at 1.1 trillion baht
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below