THAILAND STILL needs an easing monetary policy to boost the economy, while the current interest rate is appropriate for the country's economic situation, according to the Bank of Thailand, which expressed confidence that there remained sufficient monetary room for rate adjustment in either an upward or downward direction.

Prasarn Trairatvorakul, governor of the central bank, said monetaryeasing remained necessary and appropriate for the current state of the economy, given that it was not expanding too strongly and there was little inflationary pressure.

As part of the report on its Article IV consultation with Thailand, the International Monetary Fund said the Kingdom's current accommodative monetary-policy stance was appropriate, but authorities should stand ready to normalise the policy stance if inflationary pressures re-emerged.

The financial authorities should consider revenue-enhancing measures like higher property and consumption taxes, as well as a cut in personal income-tax credits, in order to maintain the commitment to fiscal discipline, said the IMF.

It also urged a further reduction in generalised energy subsidies and a replacement of the rice-pledging scheme with budgetary transfers targeted at low-income rural households.

Prasarn said that the IMF had not urged Thailand to hurry to normalise the policy stance, but had just given the academic view that if the global economy recovered, inflation would accelerate and preparation should be made to normalise the stance.

He added that if one looked into the detail of its report, the IMF was satisfied with the central bank's current monetary easing and the room available to cope with the economic situation.

"They [IMF] say that we have monetary space with flexibility for two-direction adjustments. Previously, we've been trying to keep the [interest] rate not too low. If the situation turns to the other side, we can make adjustment," he said.

However, Deputy PM and Finance Minister Kittiratt Na-Ranong said the IMF had insufficient in-depth understanding of the Thai economy, given its criticism that the government's rice-pledging scheme and oil subsidy had pressured the fiscal position.

He cited in particular the suggestion that Thailand should raise the policy interest rate to deal with inflation. He insisted that those in the Kingdom may understand that such solutions would not fit the country's current economic situation.

Kittiratt said the government also had solutions for the problems of Thai farmers, but the plan to include off-season rice pledging had come after the IMF consultation deadline.

"I haven't read the IMF report in detail, but it might contain incorrect understanding in several parts. The government is ready to listen to the IMF's observations, however it [the fund] may have to gain more in-depth understanding of Thailand's situation before releasing its review. It may have to consider whether [solutions suggested] suit the country," he added. Niwattumrong Boonsongpaisarn, deputy prime minister and commerce minister, agreed that the IMF might not have adequate understanding of the rice-pledging scheme.

Usually, all Thai governments have had to give subsidies of no less than Bt80 billion per year for agricultural products. The rice-pledging scheme is just a little costlier than normal, he argued.

Aside from rice-pledging, the government plans a parallel improvement in rice production, a reduction in production costs, and rice development, while other crops will be grown to generate more income, he added.

New round of bidding

Meanwhile, the Commerce Ministry is scheduled to open bidding for 452,537 tonnes of rice for general traders on November 19, comprising 300, 275 tonnes of jasmine rice and WBR A 1 Super for domestic trading, and 152,262 tonnes of 5-per-cent white rice for export.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the bidding would attract fewer traders as more production was entering the market during the current harvest season.

Moreover, foreign buyers have acknowledged that the government has a huge amount of rice in its stocks, and they will bargain for cheaper prices.

Source: The Nation