Sirin may be scapegoat in big BOT battle

Thanong Khanthong and Vatchara Charoonsantikul look at the plight of Sirin Nimmanahaeminda.

IT is widely held that fear of being sacked by Cabinet on April 11 spurred Bank of Thailand governor MR Chatu Mongol Sonakul to shore up his position by threatening to charge Sirin Nimmanahaeminda, the younger brother of Finance Minister Tarrin Nimmanahaeminda.

A source close to Sirin said there had been doubts whether Sirin was being used as a scapegoat in the bitter conflict between Chatu Mongol and Tarrin. But there can be little doubt that by going after Sirin, Chatu Mongol has strengthened his position politically, since any attempt to remove him would be seen as tit-for-tat retaliation.

Sirin, the former president of Krung Thai Bank, on Friday said he believed the central bank's attempt to bring criminal charges against him for extending bad loans was "100 per cent politically motivated".

Over the weekend, Sirin was considering how to counter the criminal charges to be lodged against him some time this week by the Bank of Thailand. Rattakorn Nimwattana, the central bank's assistant governor for legal affairs, hinted there would be criminal charges against the for mer management of Krung Thai Bank. He would not name of the defendant nor the loan scandal it involved. But it was known that Sirin was the prime target in the fierce personal conflict between the finance minister and the central bank governor, which at this point has reached breaking point.

Rumours were swirling around last week that the Chuan Cabinet might remove Chatu Mongol, accused of trying to politicise the conflict between the central bank and the Finance Ministry at the expense of the popularity of the Democrat Party.

The Democrats and Tarrin, in particular, are angry that Chatu Mongol has drawn in Luangta Mahabua, a highly-revered monk, into the dispute between the Finance Ministry and the central bank over who should pay the bills of the Financial Institution Development Fund.

Luangta Mahabua last week launched his attack against the government over the possible abuse of his Thais-Help-Thais Fund, which has contributed about Bt1.7 billion to the central bank's international reserves. Luangta Mahabua commands strong influence on opinion and his view could have a far-reaching impact on the Democrats' political standing.

Confusion has continued over the ramification of the central bank's impending move to consolidate its accounting books of the Note Issue Department and the Banking Department, in line with the draft amendment of the Bank of Thailand Act. After the consolidation, there might be some foreign exchange gains. Tarrin would like to use these proceeds to reduce the burden of the FIDF, saddled with Bt1.3 trillion in debt.

But Chatu Mongol does not agree with the move, thinking it would set a bad precedent and would amount to a blatant violation of monetary discipline. If consolidation takes place, Luangta Mahabua's money, kept by the Banking Department, will be used to pay off the debt of the FIDF. Part of the Thais-Help-Thais money has been kept in US dollars, properly documented and deposited at the US Federal Reserve; another part of it has been kept as gold in the central bank's safe.

Luangta Mahabua insisted the money must be used to back the issue of the baht in circulation and not for other purposes. The central bank needs at least US$10 billion in foreign exchange reserves to back the baht in circulation -- about Bt400 billion. Though the contribution from the Thais-Help-Thais Fund is of no financial significance, it has a great moral cause. However, Thailand's most serious problem is how the government should service the FIDF's debts. The issue has polarised the Finance Ministry and the central bank.

Supachai Pisitvanich, permanent-secretary of the Finance Ministry, last week went against Chatu Mongol, accusing the central bank of being irresponsible with the country's problems. He and his officials said the central bank would like to keep the money to itself so that it could stay fat, while the rest of the country would suffer because they would have to pay taxes to compensate the FIDF.

The government has been running fiscal deficit spending for three years in succession. It will again have to endorse deficit spending for the next fiscal year before going into the general election. The FIDF is part of the problem that will have to be tackled because if left unattended, it will undermine the fiscal position of the government and the macroeconomic conditions as a whole.

Prime Minister Chuan Leekpai expressed disbelief at the clash between his finance minister and the bank's governor.

Chuan's line of defence is that since Tarrin appointed Chatu Mongol, he should handle the governor.

There are rumours that Chatu Mongol is a favourite candidate to take over the finance portfolio if Thaksin Shinawatra, the leader of the Thai Rak Thai Party, wins the next election.

Another source indicates that Chatu Mongol is also tipped to succeed Chirayu Issarangkun Na Ayutthaya as director of the Crown Property Bureau.

Tarrin is now facing the dilemma of having to deal with a stubborn governor who has become too independent and refuses to support the policy of the government.

If he fires Chatu Mongol, Tarrin would be seen as retaliating to help his brother. But if he keeps on the governor, he will risk derailing the gov ernment's policies because the Finance Ministry and the central bank are not coordinating in fiscal and monetary policies.

In broad terms, removing the governor would also risk undermining the confidence of foreign investors at a time when Moody's Investors Service is about to upgrade the sovereign debt rating of Thailand.