Thai Finance Chief Advocates Access to Credit Without Cutting Interest Rates - Latest Global News

Thai Finance Chief Advocates Access to Credit Without Cutting Interest Rates

Thailand’s new Finance Minister Pichai Chunhavajira called on the central bank to improve access to credit for private borrowers and small businesses, while reiterating the need to synchronize fiscal and monetary policies to support Southeast Asia’s second-largest economy.

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(Bloomberg) — Thailand’s new Finance Minister Pichai Chunhavajira urged the central bank to improve access to credit for retail borrowers and small businesses, while reiterating the need to synchronize fiscal and monetary policies to support Southeast Asia’s second-largest economy.

Access to credit and liquidity is more important than the level of interest rates, Pichai told reporters after his first meeting with Bank of Thailand Governor Sethaput Suthiwartnarueput since being appointed finance minister last month. Thailand’s financial institutions are strong and have the ability to relax rules for various “sensitive groups” of borrowers, he said.

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“The government is concerned about access to credit,” said Pichai, a former chairman of the country’s stock exchange and a board member of several energy companies. “The first thing people want today is access to credit. If they have to choose between a half percentage point lower interest rate and access to credit, they will choose access.”

Pichai’s meeting with Sethaput came after BOT ignored repeated calls for a rate cut from Prime Minister Srettha Thavisin and the ruling party chief said the monetary authority’s independence was an obstacle to reviving the economy. But Pichai tried to ease tensions by saying that deciding on interest rates was the sole domain of the central bank and the government would not interfere in monetary policy matters.

“The key interest rate is something that people outside Thailand pay attention to,” Pichai said. “We will not address this issue as it concerns many factors,” the minister said, adding that BOT will use its tools and data to analyze the inflation trend and clarify how this occurs within the framework of the agreement between the Central Bank and the Ministry of Finance agreed goal can be controlled.

Pichai said his two-hour meeting with Sethaput helped the two better understand each other’s positions. “We speak the same language and have no problems. We had a good discussion today.”

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BOT has kept borrowing costs at a decade-high 2.5% since September even as inflation slipped into negative territory. It said last month that maintaining the key interest rate had given it “policy options” to deal with currency volatility, geopolitical risks and uncertainties arising from the timing of the Federal Reserve’s move toward easing.

High interest rates and Thailand’s near-record household debt levels have contributed to a rise in bad loans and prompted lenders to be more cautious about issuing new loans. Tighter lending rules for automobiles and other consumer durables have led to a slowdown in private consumption, central bank data show.

Most commercial and state banks last month cut minimum retail interest rates for some borrowers by 25 basis points for a six-month period after Srettha urged lenders to reduce borrowing costs for borrowers struggling with high interest rates.

Thailand’s economy likely grew 0.7% in the first quarter, the slowest pace in the region where other countries are posting growth above 4%, according to a Bloomberg survey.

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