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Thai central bank to end military's currency controls

The Bank of Thailand said yesterday it would lift the remaining currency controls imposed by the previous military regime, marking a sharp shift in economic policy.

Central bank governor Tarisa Watanagase told reporters that the rules, imposed in December 2006, would stop being effective from Monday.

"The central bank decided to lift the capital controls because of the improving economic situation and the balance in capital inflows and outflows," she said.

The capital controls were imposed by the military regime that toppled former prime minister Thaksin Shinawatra in a bid to curb the Thai baht's rise against the US dollar.

The reversal was announced just one day after Thaksin staged a dramatic homecoming, ending nearly one-and-a-half years of self-imposed exile.

Finance Minister Surapong Suebwonglee said on Thursday that he might consult with Thaksin on the capital controls, but it was not known if the two had actually discussed the issue.

The capital controls required 30 percent of all incoming investments to be held by financial institutions for up to one year.

But the controls spooked foreign investors, who saw the regulations as a steep tax on equity investments, and caused the biggest one-day drop in the Thai stock market in late 2006, involving losses of US$23 billion.

Speculation that the controls would be scrapped have already pushed the baht higher this week.

The unit closed at 31.96 to 31.98 baht to the dollar yesterday.

The baht traded at about 35.33 baht to the dollar when the controls were imposed.
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