The dean of the Faculty of Economics at the University of the Thai Chamber of Commerce has proposed significant changes to the role of the Bank of Thailand (BoT) to better align with internal economic dynamics and navigate global financial volatility. On June 22,
Anusorn Tamajai made a suggestion yesterday, June 22, for the BoT to reconsider its exchange rate system, increase money supply, and restructure international reserves to bolster the potential growth of Thailand’s GDP.
Adjustments to the exchange rate and the baht, coupled with an increased money supply, could drive GDP growth to 4 to 5% while maintaining inflation targets. Anusorn further emphasised the necessity of shifting from a centralised financial system to a decentralised digital finance model, spurred by technological advancements that challenge traditional fiat money systems.
The proliferation of digital currencies impacts price stability and monetary policy, influencing central bank balance sheets and money supply controls through open market operations.
With the growing use of digital and cryptocurrencies, monetary policymakers face decisions on regulatory frameworks to mitigate risks to financial stability. The shift to a decentralised system, enabled by blockchain technology, could alter the roles of central and commercial banks, decreasing the prominence of traditional financial intermediaries and increasing peer-to-peer finance, says Anusorn.
The BoT could leverage Distributed Ledger Technology to enhance digital financial system efficiency and security. Presently, interbank payments employ DLT and smart contracts, but transactions remain bank-specific.
Digital shift
Anusorn suggests that the BoT explore a Central Bank Digital Currency (CBDC) for public use, offering convenience similar to cash but with interest benefits, thereby enhancing central bank control over money supply.
The current monetary system, reliant on fiat money and fractional reserve banking, necessitating deposit insurance and central bank backing as a lender of last resort, faces evolution due to financial technology dynamics and new system designs, potentially reducing guarantee costs.
Non-traditional financial service organisations, including fintech, could increasingly participate in the financial sector.
Anusorn also highlighted the necessity for the BoT to oversee non-bank financial businesses like leasing, ensuring comprehensive financial system stability. He proposed a clearer separation of the BoT’s financial institution supervision and monetary policy functions, focusing more on financial service activities regulation.
Additionally, he urged the BoT to reassess international reserve management strategies to counteract severe economic and financial market volatility, considering the depreciation of the US dollar and US government bonds amidst a significant global financial system transition.
KhaoSod reported survey data that indicated household debt averages of over 600,000 baht, with 70% formal and 30% informal borrowing, primarily for consumption. The BoT’s financial measures must support debt deleveraging to reduce household financial vulnerability amid external and internal economic fluctuations.
The dean suggested that investments in job creation and income generation offer more sustainable benefits than consumption stimulus or debt relief. Measures targeting vulnerable business sectors and households should be comprehensive and address varied debtor issues.
Political uncertainty poses additional risks to Thailand’s economy, potentially delaying the 2025 budget approval, as seen with the 2023 budget, which negatively impacted public investment spending. Furthermore, escalating conflict involving the US, Israel, and Iran could destabilise global energy prices and weaken the global economy further.
The story Reforms urged for Bank of Thailand amid global financial shifts as seen on Thaiger News.
