Thai Finance Chief Bats for Loan Access in Absence of Rate Cut

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

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Access to lending and liquidity are more important than the level of interest rate, Pichai told reporters after his first meeting with Bank of Thailand Governor Sethaput Suthiwartnarueput since his appointment as the finance minister last month. Thailand’s financial institutions are strong and they have the scope to ease rules for various “sensitive groups” of borrowers, he said.

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

Pichai’s meeting with Sethaput came after BOT ignored repeated calls for a rate cut by Prime Minister Srettha Thavisin, and the ruling party chief said the monetary authority’s independence was an obstacle to reviving the economy. But Pichai sought to dial down tensions by saying rate decision is the sole domain of the central bank and the government wouldn’t meddle in monetary policy matters.

“Policy rate is something people outside Thailand are looking at,” Pichai said. “We will not touch this issue as it involves many factors,” the minister said, adding that BOT will use its tools and data to analyze inflation trend and how to manage it within the target agreed between the central bank and the finance ministry.

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

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

High interest rate and Thailand’s near-record household debt level have contributed to an uptick in non-performing loans, prompting lenders to be more cautious in granting fresh loans. Tighter lending rules for automobile and other consumer durable purchases has led to a cooling in private consumption, central bank data show.

Most commercial and state-owned banks lowered the minimum retail rates by 25 basis points last month for a six-month period for some borrowers after Srettha appealed to lenders to ease loan costs for borrowers battling high interest rates.

Thailand’s economy probably expanded 0.7% in the first quarter, according to a Bloomberg survey, making it the slowest pace in the region where peers are notching a pace of 4% plus growth.

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