Saturday, 1 March 2008

Thai central bank lifts capital controls Monday

BANGKOK, Feb 29 (TNA) – After a year of implementing reserve witholding measure, by which Thailand forced investors to hold in reserve 30 per cent of all short-term capital flowing into the country, the Bank of Thailand (BoT), the country's central bank, acted Friday to remove the measure, effective Monday.

BoT Governor Tarisa Watanagase announced the lifting of the controversial measures to take effect March 3, ending the regime of the unremunerated reserve requirement (URR) after nearly 15 months in effect, a measure that was introduced to rein in the volatility of the Thai baht when demand was falling and "robust export growth was the main driver of the economy".

Political and economic players alike have both supported and condemned both the initiation the measures, and the ending of their implementation.

Stating that the country's economic performance in the last quarter of 2007 and in January this year indicated that the time was right to withdraw the measures, Mrs. Tarisa indicated Friday that the time had arrived.

"Foreign exchange inflows/outflows have become more balanced', according to a BoT statement, with a moderate trade account surplus in January 2008, increasing Thai investments abroad, and regulations permitting residents to deposit foreign currencies as of this month.

The appreciation of the baht – whether it will continue, and by how much – is at issue.

Mrs. Tarisa told a press conference that the controversial capital controls the BoT had imposed to restrain the country's currency from getting too strong had done the job they were intended to do.

The BoT's move follows the policy of the new government of Prime Minister Samak Sundaravej to remove the controls.

The central bank's web site is carrying notification of the lifting of the URR measures, rules for non-resident baht accounts and related matters at (TNA)-E006