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BANGKOK, Dec 22 - The Bank of Thailand should exercise greater care in managing the monetary policy and the currency exchange rate, according to a leading Thai economist.
Commenting on the Bank of Thailand's (BoT) decision to impose a 30 per cent reserve requirement on short-term capital inflows, Ammar Siamwalla, distinguished scholar at the Thailand Development Research Institute (TDRI), said the central bank should cut the policy interest rate in a first move to curb the baht fluctuation.
He said a large amount of foreign capital had flown into Thailand partly because local interest rates are too high.
It was a pity, he observed, that the central bank opted to impose a mandatory reserve, which is a harsh measure, as its first step to stem speculation in the baht, which led to a panic-selling by investors.
So, he said, the Bank of Thailand must exercise greater caution in managing the currency exchange rate.
He conceded that the baht had strengthened due to external factors--because the US dollar had weakened. Nonetheless, the baht had become stronger than other regional currencies. So, the central bank needed to manage the currency properly.
"Actually, the reserve requirement measure is a good one. But many countries avoid taking it or count on it as a last resort because it is harsh," he said.
Regarding the question of nominees, he said, the government needed to give local and foreign investors 3-5 years to adjust themselves. (TNA)
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