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BANGKOK, Dec 20 - The Bank of Thailand's move to impose a reserve requirement on short-term capital inflows would benefit the economy in the long run, according to a top Thai banker.
Bangkok Bank executive chairman Chatri Sophonpanich said the central bank was forced to introduce the mandatory reserve measure because its lack of response could put the country's economy in jeopardy.
He considered the measure as being not too harsh. The baht appreciation, if allowed to go unabated, would lead to an economic crisis like that in 1997.
Mr. Chatri said Tuesday's plunge in the Stock Exchange of Thailand index was not worrisome because most capital outflows stemmed from funds used for speculation.
The BBL chief chairman said it would need a few days to assess how effective the reserve requirement will be in producing a result.
Mr. Chatri viewed the baht depreciation to 35-36 per cent as being considered stable and not too weak.
In some countries, he said, the implementation of mandatory reserves would weaken their currencies and discourage foreign capital inflows, but for Thailand, it is not worrisome because the country's international reserves remain at their highest level.
He said recent capital inflows stemmed chiefly from undesirable short-term funds.
The capital the country wants is permanent or for long-term investment. (TNA)
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